State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
When must an insurable interest in the insured's life exist for a California life insurance contract to be valid?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California law (CIC Section 10110) requires that an insurable interest in the insured's life exist at the inception of the contract — when the policy is applied for and issued. The interest does not need to continue through death; a policyowner may later lose the insurable interest, for example when a key employee leaves, and the death benefit is still payable. This timing rule distinguishes life insurance from property insurance, where insurable interest must exist both at inception and at the time of loss.
Why the other options are wrong
- B) Life insurable interest need not be continuous; once it validly exists at issue, the contract stands.
- C) Requiring it only at death would permit strangers to wager on another's life by buying a policy, which the law forbids.
- D) Family relationship is one way to show insurable interest, but business and creditor relationships also qualify; the interest is not limited to family.
Memory hook
Life = interest at the START. Property = interest at the START and at the LOSS. Check the checkpoint.