P&CCaliforniamedium
Which statement most accurately describes the California Insurance Code's treatment of when insurable interest must exist?
AInsurable interest in property must exist only at the time of loss, not at inception; insurable interest in life must exist only at the inception of the contract
Insurable interest in property must exist at policy inception AND at the time of loss; insurable interest in life must exist only at policy inception
CInsurable interest in both property and in the life or health of a person must exist continuously throughout the entire policy term to remain enforceable
DInsurable interest in both property and in the life or health of a person must exist only at the time the insured loss or death occurs
Why this is the answer
Under California Insurance Code § 286, an insurable interest in property must exist both when the insurance takes effect and when the loss occurs — though it need not exist continuously in between. By contrast, Ins. Code § 10110.1 requires that insurable interest in the life or health of a person exist only when the contract takes effect; it need not exist thereafter. This asymmetry permits, for example, a key-person life policy to remain in force after the employee leaves the company. See Ins. Code §§ 286, 10110.1.
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