Which statement best describes insurable interest in life insurance?

Which statement best describes insurable interest in life insurance?

• A. An economic interest exists for the continuance of the insured's life
• B. A personal relationship with the insured
• C. The policy is assigned to a bank
• D. The insured has a paid-up loan

Answer: (A)

Insurable interest means you have a financial stake in the insured’s life—something you would lose financially if the insured dies or benefit from their continued life. The best description here is that an economic interest exists for the continuance of the insured’s life because it highlights the tangible financial stake that justifies the need for coverage. A personal relationship can be related to insurable interest, but that relationship alone isn’t the defining element; there must be a real economic stake. The policy being assigned to a bank describes ownership or collateral, not the fundamental reason insurable interest exists. Having a paid-up loan describes a debt situation, not the reason someone can insure the insured.

Insurable interest means you have a financial stake in the insured’s life—something you would lose financially if the insured dies or benefit from their continued life. The best description here is that an economic interest exists for the continuance of the insured’s life because it highlights the tangible financial stake that justifies the need for coverage.

A personal relationship can be related to insurable interest, but that relationship alone isn’t the defining element; there must be a real economic stake. The policy being assigned to a bank describes ownership or collateral, not the fundamental reason insurable interest exists. Having a paid-up loan describes a debt situation, not the reason someone can insure the insured.