State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
A person buys a life insurance policy on a business partner, and the insurable interest exists at the time the policy is issued. Several years later the partnership dissolves. Under California Insurance Code Section 10110, the policy:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
For life insurance, an insurable interest must exist at the inception of the policy - the time of application and issue - but need not continue until the insured's death. California Insurance Code Section 10110 sets out the relationships that create an insurable interest (such as dependency, support, or a business relationship). A later event, such as a divorce or a partnership dissolution, does not void an existing policy.
Why the other options are wrong
- B) Life insurance does not void merely because the insurable interest disappears; the contract was valid when made and remains in force.
- C) No new consent is required to keep an existing policy in force; the insurable interest requirement applies at issue only.
- D) Nothing in California law forces termination of the policy when the underlying interest ends.
Memory hook
Life insurance checks insurable interest at the door (issue), not at the exit (death). Once issued, the policy stays.