P&CNationaleasy

For a property and casualty claim to be payable, when must the insured possess an insurable interest in the covered property?

Q: For a property and casualty claim to be payable, when must the insured possess an insurable interest in the covered property?

At the time of the loss — Property and casualty insurance enforces the indemnity principle, which means a claimant can only recover for an actual economic loss they sustained. Insurable interest must therefore exist at the moment of loss — if the insured sold the property before the fire, no economic harm flows to them and no recovery is owed. Life insurance differs: insurable interest is required only at policy inception because life policies are valued contracts not indemnity contracts.

AOnly at the inception of the policy

BContinuously for the entire policy period

COnly at the time of premium payment

At the time of the loss

Why this is the answer

Property and casualty insurance enforces the indemnity principle, which means a claimant can only recover for an actual economic loss they sustained. Insurable interest must therefore exist at the moment of loss — if the insured sold the property before the fire, no economic harm flows to them and no recovery is owed. Life insurance differs: insurable interest is required only at policy inception because life policies are valued contracts not indemnity contracts.

Studying for the Property & Casualty exam?

This question comes from our P&C bank. Take a free practice test — no signup.

Free P&C practice test Property & Casualty exam guide