In insurance, insurable interest must exist at which times?

• A. Only at policy inception
• B. Only at loss
• C. At policy inception and at loss
• D. Not required

Answer: (C)

Insurable interest is the stake a person has in the insured subject that would suffer a financial loss if the event insured against occurs. The requirement is that this stake exists both when the policy is issued and again at the time a loss happens. If the policy is issued without a genuine stake, the contract could resemble a gambling transaction rather than insurance. If there’s no insurable interest at the time of loss, there would be no valid basis for payment because the insured has no actual risk to protect. Requiring insurable interest at both points ensures the insurer is taking on a real, identifiable risk and that claims are tied to a legitimate economic or familial relationship. That’s why the correct stance is that insurable interest must exist at policy inception and at loss.