Florida Life and Health Insurance License Practice Test

When must insurable interest exist in a life insurance contract?

1. At the inception of the contract

2. At the time of claim

3. Throughout the policy term

4. After the policy has lapsed

The correct answer is: At the inception of the contract

In a life insurance contract, insurable interest must exist at the inception of the contract. This means that the person taking out the policy must have a financial interest in the life of the insured. This ensures that the insurance policy is not being taken out for fraudulent reasons. Option B is incorrect because insurable interest must exist when the contract is entered into, not just at the time of claim. Option C is incorrect because the insurable interest must remain throughout the policy term, not just at certain points in time. Option D is incorrect because insurable interest is required from the beginning of the contract, not just after it has lapsed.