Factual expectation refers to a high expectation an event or occurrence which would result in a monetary interest that forms an insurable interest.
For example, family members might be fully dependent on the father to for income as he is the sole breadwinner in the household. This is why his health is of particular concern to the family from an emotional and financial standpoint. If he loses his income, then the expectation is that the family would suffer financial hardship.
Sometimes also referred to as factual expectancy, it is not wrong to suggest that for insurable interest to exist, then factual expectation must be present.
It can also be said that a party would have a factual expectation that he or she would be economically stable should an insured event not occur, but would suffer economically should an even do occur.
Life insurance for example, offers benefits including sum assured for the beneficiary when the insured individual dies.
These types of policies are often taken up by spouses and children as they have a factual expectation on the line which defines their insurable interest.
The factual expectancy test was conceptualized to determine if there is insurable interest in a case.
When there is no factual expectation, insurance policies are usually denied.
For example, one would not be able to purchase life insurance on the life of a stranger he just met at Starbucks just so he can list himself as a beneficiary.
