Question

When must an insurable interest exist in life insurance?

-at the time the application is completed
-at the birth of the insured
-at the time of application and at death of the insured
-at the time of death of the insured

Answer 1

An insurable interest must exist both when the life insurance application is completed and at the time of the insured's death for the policy to be legally enforceable.

Step-by-step explanation:

An insurable interest must exist at the time the application for life insurance is completed and at the time of the insured's death. This principle ensures that the person purchasing the policy has a legitimate interest in the well-being of the insured individual, primarily to prevent wagering on lives and financial gain from someone's death. At the application stage, the insurer will ascertain the relationship between the policy owner and the insured to confirm there's a valid insurable interest. Furthermore, the existence of insurable interest at the time of death is crucial to validate the claim and to ensure the policyholder's interest was genuine and not speculative. Without insurable interest at both of these times, a life insurance contract is not legally enforceable.