Difficulty: Medium

Average Score: 55%

To have 'an insurable interest' in the life of another person, an individual MUST have a reasonable expectation of

Rationale

Benefiting from the other person's continued life.

An individual must have a reasonable expectation of benefiting from another person's continued life to establish an insurable interest. This principle ensures that the policyholder has a genuine stake in the well-being of the insured, thereby preventing insurance contracts from being used for speculative or unethical purposes.

A (gaining economically by the death of the other person) YOUR ANSWER

This choice implies that the individual stands to gain financially if the insured person dies, which conflicts with the principle of insurable interest. Insurable interest requires that the policyholder benefits from the continued life of the insured rather than profiting from their death, as this would incentivize immoral behavior.

B (continuing on good terms with the other person) YOUR ANSWER

While maintaining a positive relationship is desirable, it is not a prerequisite for insurable interest. Insurable interest focuses on the financial and personal implications of the insured's life, rather than the social dynamics of their relationship with the policyholder.

C (benefiting from the other person's continued life) CORRECT

This option accurately reflects the requirement for insurable interest. The policyholder must have a legitimate expectation of benefit from the insured person remaining alive, which aligns with the ethical foundations of insurance practices.

D (seeing the other person survive to normal life expectancy) YOUR ANSWER

Although this choice suggests a concern for the insured's longevity, it does not encapsulate the necessary expectation of benefit. Insurable interest is concerned with the broader implications of the insured's life on the policyholder's well-being, rather than merely a desire for them to live a full life.

Conclusion

Establishing insurable interest hinges on the expectation of benefiting from another person's continued life. This criterion safeguards against the unethical potential of profiting from death, ensuring that insurance remains a tool for protection rather than exploitation. Options A, B, and D fail to meet the essential requirement, while option C correctly encapsulates the necessary condition for insurable interest in life insurance.

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