P&CTexaseasy
In property and casualty insurance, when must an insurable interest exist for a valid claim to be paid?
At the time of the loss
BAt the time of application only
CAt the time the policy is issued
DAt both policy inception and at the time of loss
Why this is the answer
Unlike life insurance — where insurable interest must exist only at policy inception — property and casualty insurance requires the insured to have a financial stake in the property at the moment the loss occurs. This prevents someone from purchasing a policy on property they no longer own, collecting a windfall, and violating the indemnity principle. If a homeowner sells a house after policy issuance but the house then burns down, no P&C claim is payable because insurable interest evaporated at the sale.
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