Question

With life and health contracts, when must an insurable interest exist?

1. After the policy is issued
2. Before the beneficiary is named
3. While the policy is in force
4. At the inception of the policy

Answer 1

An insurable interest must exist at the inception of the policy for life and health contracts. It prevents individuals from taking out policies on the lives or health of unrelated parties for speculative purposes.

Step-by-step explanation:

An insurable interest must exist at the inception of the policy for life and health contracts. This means that the policyholder must have a financial stake in the well-being of the insured party when the policy is first issued.

Having an insurable interest ensures that the policyholder has a legitimate reason to obtain insurance and prevents individuals from taking out policies on the lives or health of unrelated parties for speculative purposes.

For example, a person may have an insurable interest in their own life, the life of their spouse, or the life of a dependent.