Insurable Interest Requirement
The requirement that the policyowner face a financial or other legitimate loss if the insured suffers the covered event, preventing insurance from becoming wagering.
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Practice This Concept
Life insurance is considered a personal contract because it:
Is based on the continuing life and insurable interest of the person whose life is insured — Life insurance is personal in nature because it is rooted in the life and insurable interest of the person insured. The policyowner must have an insurable interest in the insured at the inception of coverage under CIC Section 10110, and the contract relates to the continued existence of that person. This personal character distinguishes life insurance from contracts that attach to property and underlies the rules on who may own coverage on whom. Ownership may be assigned in some circumstances, but the insurable interest requirement and the personal nature of the contract remain governing principles.
CA-specific example
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