Question 11

Insurable interest is required at the time of application.

Insurable interest must be established at the time of application for an insurance policy. This means that the applicant must have a legitimate stake in the continued life or health of the insured individual or the insured property.

A) at the time of a claim

This option is incorrect because insurable interest is not evaluated during a claim. By the time a claim is filed, the policy has already been issued, and the focus shifts to the terms of the policy rather than the initial requirement of insurable interest.

B) at the time of application

This option is correct as insurable interest must be present when the application for insurance is submitted. It ensures that the applicant has a valid interest in the policy, preventing moral hazard and ensuring the contract is enforceable.

C) in the event of a policy loan

This option is incorrect because insurable interest is not specifically required at the time of a policy loan. While the policy must still be valid and in force, the requirement for insurable interest applies to the initial application rather than subsequent transactions involving the policy.

D) within the first year of death

This option is also incorrect since insurable interest is not assessed or required after the issuance of the policy, particularly not in relation to a death that occurs after the first year. The requirement is strictly at the point of application.

Conclusion

The requirement for insurable interest is fundamental to the insurance process and is strictly enforced at the time of application, making Option B the definitive correct answer. All other options fail to recognize that this requirement must be established before the policy is issued, thereby ensuring the integrity of the insurance contract.