Insurable interest does NOT exist between which pair?

• A. Two unrelated neighbors
• B. Husband and wife
• C. Parent and child
• D. Business partners

Answer: (B)

Insurable interest in life insurance exists when the policyholder would suffer a financial or economic loss if the insured dies, or could gain financially if they live. This is what allows someone to purchase and own a life policy on another person.

Two unrelated neighbors usually have no financial or familial bond that would be affected by the other’s death, so there isn’t an insurable interest between them.

Husband and wife generally do have insurable interest because their lives are economically interdependent and the death of one can create a financial impact on the other.

Parent and child relationship also creates insurable interest, since the parent (or the policyowner) has a financial stake in the child’s life, such as support and future earnings.

Business partners have insurable interest too because the death of a partner can affect the value and continuity of the business.

Therefore, the pair without insurable interest is two unrelated neighbors.