Life License Qualification Program (LLQP) Practice Exam

Insurable interest must be present at the time of application for an insurance policy. This means that the policyholder must have a legitimate interest in the life or property being insured and would suffer a financial loss if the insured event occurs. This requirement ensures that insurance contracts are not used for speculative purposes or gambling, as they are designed to provide protection against loss rather than to benefit from the occurrence of such a loss.

While the concept of insurable interest might be relevant at other stages, such as at delivery or during the life of the policy, the key point is that it must exist when the policy is being applied for. This is foundational to the legality and functioning of insurance contracts. If insurable interest is not established at the time of application, the contract may be deemed void, meaning that it cannot be enforced in a legal context, as the basic principle of insurance hinges on the existence of this interest.