NOT true about insurable interest?

• A. It can be established sufficiently by sentimental attachment alone
• B. It can be established by ownership of the insured's life
• C. It can be established by a familial relationship
• D. It can be established by a contractual agreement creating a financial stake

Answer: (A)

Insurable interest means there must be a legitimate financial or legal stake in the insured’s life that would expose the owner to a loss if the insured dies. Sentimental attachment alone does not create that risk for the insurer, so it isn’t sufficient to establish insurable interest.

Ownership of the insured’s life clearly creates a financial stake—if the insured dies, the owner bears a loss. A familial relationship often satisfies insurable interest because family members typically have a recognized dependency or potential financial impact from the death. A contractual agreement that creates a financial stake—such as a loan or business arrangement secured by a life policy—also establishes insurable interest because the death would affect the contractual party’s financial position.

So, sentimental attachment by itself is not enough, while ownership, family ties, and contractual financial stakes are valid bases for insurable interest.