Question

Jebran is an insurance agent and he meets with his client, Sheena. Jebran informs Sheena that her application for insurance has been declined by the insurance company because there is no insurable interest. When Sheena asks Jebran to explain what this means, which of the following would CORRECTLY explain why there is no insurable interest?
a)		Sheena would be in a position to profit from the death of the life insured.
b)		Sheena does not have the financial means to afford the policy premiums.
c)		Sheena is expected to fail to make a financial gain if the life insured dies.
d)		Sheena is not expected to suffer a financial loss if the life insured dies.

Answer 1

a)

Sheena would be in a position to profit from the death of the life insured.

insurable interest is a type of investment that protects anything subject to a financial loss. A person or entity has an insurable interest in an item, event or action when the damage or loss of the object would cause a financial loss or other hardships. To have an insurable interest a person or entity would take out an insurance policy protecting the person, item, or event in question. The insurance policy would mitigate the risk of loss if something happens to the asset—like becoming damaged or lost.