Explain what is meant by an insurable interest and what impact the existence of this principle has on the right to collect on an insurance claim.

One of the most important aspects of insurance law is the requirement that the person taking out insurance have an insurable interest in the thing insured. The insurable interest requirement is simply that the person purchasing insurance coverage will lose something if the insured-against event happens. There is no windfall to the person taking out the insurance; rather, there is simply compensation for a loss. If you could insure something you didn't have an interest in, such as your neighbour's house, you could get a windfall, and it would be like gambling.
Where life insurance is involved, the extent of the interest is assumed to be the amount of insurance coverage purchased. With a relative, the presence of an insurable interest is clear, but with others, permission is normally needed. Often the life of key employees or the principal of the business will be insured to cover against the loss to the business were that key employee to die suddenly.