An insurable interest in insuring a person's life exists if an economic interest exists for the continuance of the insured's life.

• A. A close family relationship
• B. Financial debt unrelated to life
• C. Only if the policyholder is the insured
• D. Economic interest exists for the continuance of the insured's life

Answer: (D)

Insurable interest in life insurance exists when the policyowner would suffer a financial loss if the insured dies. That means the owner has a stake in the insured’s continued life, not just a personal connection.

The best choice captures this idea by stating that an economic interest exists for the continuance of the insured’s life. That economic stake is what legitimizes the policy and prevents wagering on someone’s death.

A close family relationship can sometimes accompany insurable interest, but isn’t by itself the defining requirement—the essential factor is the actual financial or economic stake in the insured’s continued life.

A debt might imply some financial concern, but if it’s unrelated to the insured’s continued life or to the insurer’s risk, it doesn’t establish the necessary link. And the policy owner does not have to be the insured; insurable interest can exist between different parties (for example, a business may insure a key employee, or a spouse may insure the other spouse).

So the correct concept is that insurable interest exists because there is an economic interest in the continuance of the insured’s life.