Ace the 2026 Life & Health Insurance Exam – Insure Your Success Today!

To possess an insurable interest regarding a loss, a person must have a situation where they stand to lose more than they gain from the insurance coverage. Insurable interest is a fundamental principle in insurance, ensuring that the insured party would suffer financially from a loss and thus has a legitimate interest in the continued existence of the insured property or person.

Having more to lose than gain signifies a financial motivation that aligns with the purpose of insurance, which is designed to mitigate potential financial losses. This connection is crucial in preventing moral hazard, where individuals might be tempted to cause a loss because they would profit from the insurance payout.

While a financial connection may contribute to insurable interest, simply having a financial stake does not necessarily satisfy the requirement without the context of actual risk of loss. Emotional attachment can be significant in personal insurance settings, but it does not meet the legal definition of insurable interest. Health status might be relevant in terms of underwriting but is not a direct criterion for establishing insurable interest in the context of loss.