Arizona Adjuster Practice Exam

In the case of Chad's home suffering water damage, who can collect insurance for the repairs?

1. The future owner of the property

2. Only Chad, the current owner of the property

3. Both Chad and the buyer

4. The insurance company itself

The correct answer is: Only Chad, the current owner of the property

The correct answer focuses on the principle of insurable interest in the context of property insurance. Only Chad, as the current owner of the property, has the legal right to collect insurance for the repairs resulting from water damage. This is because insurance policies are designed to cover losses experienced by the owner at the time the incident occurs. In this situation, Chad possesses insurable interest in his home, meaning he stands to lose financially if the property is damaged. If a claim is made, the insurance payout is intended to restore the property to its prior condition for the policyholder—the person who has ownership at the time of the loss. In contrast, while future owners may have an interest in the property, they are not entitled to collect insurance for damages incurred while the current owner (Chad) holds the policy. Moreover, the insurance company itself would not collect on the repairs as it is their role to compensate the policyholder for covered damages rather than seek repair costs for their own benefit.