Legal Definitions - wager policy

A wager policy is an insurance policy issued to a person who has no insurable interest in the person or property covered by the policy. This means that the person has no financial stake in the outcome of the policy. Wager policies are illegal in most states because they encourage gambling and fraud.

For example, if someone takes out a life insurance policy on a stranger, they have no insurable interest in that person's life. If the person dies, the policyholder would receive a payout, which is essentially a bet on the person's death. This is illegal and considered a wager policy.