Question

At what time must a policy owner have insurable interest in the insured for the life policy to be valid?

a) At the time of policy issuance
b) At the time of the insured's death
c) Throughout the entire policy term
d) At the time of premium payment

Answer 1

Insurable interest must be present at the time of policy issuance for a life insurance policy to be valid.

Step-by-step explanation:

Insurable interest is a key requirement for a life insurance policy to be valid. According to insurance principles, a policy owner must have insurable interest in the insured at the time of policy issuance. This means that the policy owner must have a financial or emotional interest in the insured's life.

Insurable interest refers to the policy owner's financial or emotional stake in the continued existence and well-being of the insured. It ensures that the policy owner has a legitimate reason to take out an insurance policy on someone's life, rather than using it as a means of gambling or profiting from another person's death.

For example, a person generally has insurable interest in their spouse, children, or business partners because their financial well-being or emotional support could be affected by their death. However, someone who has no relationship or financial dependency on the insured person typically does not have insurable interest.