Question 66

Insurable interest in the life of another person must exist at the time the contract is made.

Insurable interest in the life of another person is required to be present when the insurance contract is established. This ensures that the policyholder has a legitimate interest in the continued life of the insured, which is a foundational principle in insurance law.

A) at the time the contract is made

This option is correct because, in New York State, the law stipulates that insurable interest must exist at the inception of the contract. This requirement helps prevent insurance from becoming a speculative venture and ensures that the policyholder has a genuine interest in the life of the insured.

B) at the time of the claim

This option is incorrect as it suggests that insurable interest can arise after the contract is made. In reality, the requirement is that the interest must exist when the policy is issued, not at the time a claim is filed.

C) from the effective date to the time of claim

This option is also incorrect. While insurable interest must exist during the policy's effective period, it is specifically required to be present at the moment the contract is created, not just throughout the duration of the policy.

D) five years after the policy has been in effect

This option is incorrect because it implies that insurable interest is valid for a limited time after the policy starts. The law requires insurable interest at the time of contract formation, rendering any subsequent timeframe irrelevant to the requirement.

Conclusion

The requirement for insurable interest to exist at the time the contract is made is essential to ensure ethical practices in insurance. All other options fail to align with this principle, as they either propose a time frame that does not conform to legal standards or misinterpret when the interest must be established. Thus, option A is definitively the correct choice.