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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance

In insurance, the principle of 'insurable interest' requires that the person buying a property insurance policy must:

The policyholder must stand to suffer a financial loss if the insured property is damaged or destroyed. Insurable interest is the legal financial stake in the subject matter, and it prevents insurance from becoming a wager. Kinship, holding period or lump-sum premium payment are not conditions for it.

  1. AStand to suffer a financial loss if the insured property is damaged or destroyedCorrect
  2. BBe a close blood relative of the person who built the property
  3. CHave purchased the property at least five years before taking the policy
  4. DPay the premium in a single lump sum at inception

Explanation

Insurable interest means the policyholder has a legal, financial stake in the subject matter, so loss to it causes the policyholder a financial loss. Without it, the contract would be a wager. Relationship, holding period and single-premium payment are not requirements for insurable interest.

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