Associate In Insurance (AINS) 103 Practice Exam

In property/casualty insurance, when must insurable interest exist?

Only at the time of loss At policy inception and must be maintained Only at policy renewal Only at death

Correct Answer:

At policy inception and must be maintained

Explanation:

Insurable interest is about having a real stake in the insured property—the financial risk you’d bear if it were damaged or lost. In property/casualty insurance, the contract is intended to indemnify someone who would suffer a loss, so that risk must exist when the policy is issued and continue throughout the policy term. If the interest isn’t present at inception, there would be no valid basis for the insurer to issue coverage in the first place. Likewise, if your stake ends during the term (for example you no longer own the property or the loan is paid off), continuing coverage would be inappropriate because there’s no longer a real risk to insure. That’s why insurable interest must exist at policy inception and be maintained for the duration of the policy.

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