Insurable Interest

Which of the following most accurately describes "insurable interest" in a life insurance policy? A. Insurable interest is the relationship between the person paying for the insurance and the designated beneficiary. B. Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured. C. Insurable interest is the primary factor in determining how much life insurance the insurer will issue on a person. D. Insurable interest is the relationship between the person applying for insurance and the insured at the time of the insured's death.

B. Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured.

Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? A. The company would have to drop its coverage for both Hugh and June within 30 days of their departures. B. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. C. The company can only retain its coverage on June because she is not a principal of the company. D. The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.

B. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not.

All of the following are automatically deemed to represent an insurable interest EXCEPT: A. Sue (the applicant) and her husband B. Karen (the disabled applicant, age 28), and her father who cares for her. C. Frank (the applicant) and his elderly neighbor D. ABC Corp. (the applicant) and its key executive

C. Frank (the applicant) and his elderly neighbor

All the following uses for life insurance in a business represent a valid insurable interest, EXCEPT: A. Life insurance bought by businesses to cover the lives of their key employees or owners. B. Life insurance purchased by business partners to provide funds that can be used to buy out the business interest of the one who dies. C. Life insurance used to provide funds in the event an insured key employee or partner dies. D. Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies.

D. Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies.