Arizona Adjuster Practice Exam

Which statement about insurable interest is true?

1. Only the owner has insurable interest

2. Insurable interest is not necessary for property

3. Insurable interest must exist at the time of loss

4. Anyone can have insurable interest

The correct answer is: Insurable interest must exist at the time of loss

The concept of insurable interest is a fundamental principle in insurance. It refers to the requirement that the policyholder must have a stake in the insured item, meaning they would suffer financial loss or hardship if the item were to be damaged or lost. In the context of your question, having insurable interest must exist at the time of loss is true because it emphasizes the need for the policyholder to have a genuine relationship with the property or item that is being insured. This requirement helps prevent moral hazard, where someone might intentionally cause a loss or damage if they had no real financial stake in the item. This principle also ensures that insurance policies are valid and enforceable; without insurable interest at the time of the loss, claims can be considered invalid. Thus, recognizing and confirming insurable interest at the point of a claim is crucial for the integrity of the insurance system.