State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Under California law (CIC Section 10110), when must an insurable interest exist on a life insurance policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CIC Section 10110 requires that an insurable interest exist when a life insurance policy is taken out. The policyowner must have a genuine interest in the continuation of the insured's life at inception, which is what separates insurance from a wagering contract. Importantly, the interest does not have to continue: if a marriage ends in divorce or a creditor is repaid after the policy is issued, the policy remains valid. The insurable interest is measured at the moment of application and issuance, not later.
Why the other options are wrong
- B) The law does not require the interest to be maintained; once validly issued, the policy survives a later loss of the interest such as divorce or a repaid debt.
- C) The interest cannot be evaluated only at claim time because the policy would already be in force; the controlling moment is issuance.
- D) Changing the beneficiary has no effect on the insurable interest requirement, which is fixed at inception of the contract.
Memory hook
Interest at the start; the policy can outlive the interest.