State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under California Insurance Code Section 10110, when must the policyowner have an insurable interest in the insured's life?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
For life insurance, California law (CIC §10110) requires that an insurable interest exist at the time the policy is issued — the point of contract formation. Unlike property insurance, where insurable interest must exist at the time of loss, life insurance does not require a continuing interest at death; the policyowner may even maintain the policy after the relationship giving rise to the interest ends. The purpose is to prevent a wager on someone's life: at inception the owner must stand to suffer genuine financial loss from the insured's death.
Why the other options are wrong
- B) For life insurance the insurable interest is tested at policy issue, not at death. California law does not require that the interest continue to exist at the time of the insured's death.
- C) CIC §10110 requires the interest only at the point of contract formation. There is no additional requirement that the interest be re-verified at the insured's death or at claim time.
- D) The interest is fixed when the contract forms at issuance, not deferred until a claim is presented. Waiting until a claim would defeat the statute's purpose of preventing wagering on a life.
Memory hook
Life: interest at birth of the policy. Property: interest at death of the claim.