When must insurable interest exist for a life insurance contract to be valid inception of the contract.
What is insurance contract?
- An insurance contract is a document representing the agreement between an insurance company and the insured.
- The insurance contract or agreement is a contract whereby the insurer promises to pay benefits to the insured or on their behalf to a third party if certain defined events occur.
- Central to any insurance contract is the insuring agreement, which specifies the risks covered, the limits of the policy, and the term of the policy.
- The basic elements of contract (offer, acceptance, and consideration) must be present for a court to uphold an insurance agreement.
- Insurable interest must be present at the time the life insurance policy is bought in order to be covered. If the policyholder and insured are not the same individual, both the policyholder and designated beneficiary must demonstrate a financial loss and hardship in the event of the insured's demise and have an insurable interest.
A life insurance contract must be initiated before an insurable interest can exist.
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