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

Mrs. Sunita has a household income dependent on her husband, who is a 35-year-old salaried person. She asks what the 'insurable interest' requirement means for life insurance on her husband's life. Which statement is correct?

Insurable interest must exist at the time the life insurance policy is taken. A wife has insurable interest in her husband's life, so she can insure him. It need not continue until the claim, unlike general insurance, where interest is required at the time of loss.

  1. AInsurable interest must exist at the time the policy is takenCorrect
  2. BInsurable interest must exist only at the time of claim
  3. CInsurable interest is needed only for non-life insurance
  4. DInsurable interest is not required if the premium is paid by the proposer

Explanation

In life insurance, insurable interest must exist when the policy is taken; a spouse has it by natural love and affection. It need not exist at claim time. In general insurance it is needed at the time of loss. Paying premium does not replace it.

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