L&HNew Yorkmedium
Under NY Insurance Law § 3205, when must insurable interest exist for a life insurance policy procured by one person on the life of another?
AAt the time of the insured's death only
BContinuously for the life of the policy
COnly when the policy is sold on the secondary market
At the time the contract is made
Why this is the answer
§ 3205(b) requires that a person procuring life insurance on another have an insurable interest 'at the time when such contract is made.' Once issued lawfully, the policy remains valid even if the relationship ends — but the moment of underwriting is the controlling test. This is the foundation for NY's STOLI prohibition: investors who manufacture interest at inception solely to acquire the policy commercially run afoul of § 3205. Continuous interest is the property-insurance standard; NY does not apply it to life.
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