General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In accident and health insurance, an insurable interest exists when the applicant:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
An insurable interest in health-related coverage means the policyowner would suffer an economic loss if the insured becomes ill, injured, or disabled — for example, a person insuring their own income, or an employer insuring a key employee. The interest prevents wagering: without it, a policy would be a bet on another's misfortune. Blood relationship alone does not create the economic stake that insurable interest requires.
Why the other options are wrong
- B) A wager on the insured's health is exactly what insurable interest is designed to prevent; betting is not a legitimate insurable interest.
- C) A blood relationship may support life insurance insurable interest in some contexts, but for health and disability the economic-loss connection is the defining test.
- D) Paying an application fee shows intent to purchase but does not establish that the policyowner would suffer an economic loss.
Memory hook
Insurable interest = a real financial stake. Bloodlines are not balance sheets.