Under the insurable interest rule for life insurance, the policyowner's insurable interest in the insured's life must exist:

Why A is correct

For life insurance, insurable interest must exist at the inception of the contract, when the application is made, because that is when the insurer must verify that the policyowner has a legitimate economic or emotional stake in the insured's continued life. Unlike property insurance, it does not have to continue throughout the life of the policy, so a later change in circumstances does not invalidate an existing life policy. The purpose of the rule is to prevent wagering on another person's life. California codifies this timing rule in CIC Section 10110.

Why the other options are wrong

• B) Insurable interest is not tested at claim time; the contract is judged at the moment it is created, so later changes in the relationship do not affect validity. The validity of the policy depends on the relationship at the outset, not later.
• C) Continued insurable interest is not required for life insurance; once the policy is validly issued, it may remain in force even if the relationship later ends. The relationship may have changed years ago, but the contract stands as originally written.
• D) The insured's death is the event that triggers payment, but it is not the moment when insurable interest is evaluated for the validity of the contract. Once issued, a life policy may continue even if the original relationship later terminates.

Memory hook

Life insurance: interest at issue is all that matters. At claim time the question is already closed.