SILLY POINT BY mannjit

Insurable Interest: Life Insurance

1. Each individual has an unlimited insurable interest in his or her own life, and therefore can select anyone as a beneficiary.

2. Parent and child, husband and wife, brother and sister have an insurable interest in each other because of blood or marriage.

3. Creditor-debtor relationships give rise to an insurable interest. The creditor can be the beneficiary for the amount of the outstanding loan, with the face value decreasing in proportion to the decline in the outstanding loan amount.

4. Business relationships give rise to an insurable interest. An employee may insure the life of an employer, and an employer may insure the life of an employee.

Insurable interest must exist at the inception of the contract, not necessarily at the time of loss. For example, because a woman has an insurable interest in the life of her fiance, she purchases an insurance policy on his life. Even if the relationship is terminated, as long as she continues to pay the premiums she will be able to collect the death benefit under the policy.