Insurance contracts are valid contracts even though they provide for payment of money by the insurer on the happening of a future uncertain event. Such contracts differ from wagering agreements mainly in three respects:
(a) The holder of an insurance policy must have an ‘insurable interest’ in the event upon which the insurance money becomes payable. Thus contracts of insurance are entered into to protect an (-) interest. In a wagering agreement there is no interest to protect and the parties bet exclusively because they can thereby make some easy money.
(b) Contracts of insurance are based on scientific and actuarial calculation of risks, whereas wagering agreements are a gamble without any scientific calculation of risks.
(c) Contracts of insurance are regarded as beneficial to the public, whereas wagering agreements do not serve any useful purpose.