Insurable Interest: Why Coverage Requires a Legitimate Financial Relationship
What insurable interest means at policy issue and how violations can invalidate coverage intent.
Definition in Practice
- Insurable interest generally exists when the policy owner would suffer financial or relational loss from the insured’s death.
- It is usually required at policy inception under state insurance law.
- Business relationships, family relationships, and creditor relationships can create valid insurable interest depending on jurisdiction.
Why It Matters
- It protects against wagering contracts on human life.
- Bad documentation can create dispute risk during underwriting or claims.
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