P&CNJmedium

Under New Jersey indemnity principles applied to property insurance, when must the insured's insurable interest exist for the policy to be enforceable at the loss?

Q: Under New Jersey indemnity principles applied to property insurance, when must the insured's insurable interest exist for the policy to be enforceable at the loss?

At the time of loss — New Jersey follows the majority rule: a property insurance contract is enforceable only if the insured has an insurable interest when the loss occurs. The rule prevents wagering contracts and ties indemnity to a real economic relationship to the covered property at the moment damage takes place.

AOnly at the time the application is signed

BOnly at policy renewal

CBoth at issuance and at every premium payment

At the time of loss

Why this is the answer

New Jersey follows the majority rule: a property insurance contract is enforceable only if the insured has an insurable interest when the loss occurs. The rule prevents wagering contracts and ties indemnity to a real economic relationship to the covered property at the moment damage takes place.

Studying for the NJ 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