Question

Which is TRUE regarding expectant or contingent interest?

1. Expectant or contingent interest constitutes insurable interest.
2. Expectant or contingent interest does NOT constitute insurable interest.
3. Expectant interest or contingent interest qualifies for insurable interest with a waiver.
4. Both are considered insurable interest, but for only 50% of the value.

Answer 1

Expectant or contingent interest does not qualify as insurable interest because it is not based on a direct financial loss that the policyholder would suffer from the damage, loss, or death of the insured subject.

Step-by-step explanation:

The concept of insurable interest is crucial when it comes to insurance policies. Regarding expectant or contingent interest, the accurate statement is that expectant or contingent interest does NOT constitute insurable interest. Expectant interest refers to the anticipation of obtaining an interest in property or some benefit in the future, while contingent interest depends on the occurrence of a specified event, which may or may not happen. To have an insurable interest in a certain property or life, one must stand to suffer a direct financial loss from the damage or loss of the property, or from the death of the person insured. Without such a connection, you cannot legally insure the property or life, as it would be considered speculative and akin to gambling.