What is insurable interest?

• A. It means the applicant will always benefit financially from the policy regardless of ownership.
• B. It is a requirement only for group policies.
• C. At the time of application, the applicant must have a legitimate interest in the life of the insured to prevent wagering and fraud.
• D. It is required after a claim is filed.

Answer: (C)

Insurable interest means the applicant must have a legitimate stake in the insured’s life at the time the policy is applied for. This protects against wagering or fraud by ensuring the policyowner would suffer a genuine financial or other kind of loss if the insured dies. In practice, this means someone like a spouse, a parent with a minor child, or a business partner can apply, but a person with no stake cannot.

This is why the correct statement emphasizes having a legitimate interest at the moment of application to prevent wagering and fraud. It’s not about always benefiting financially regardless of ownership, it isn’t limited to group policies, and it isn’t something that’s determined after a claim.