State RegulationsMI specificDifficulty 1/5
Under Michigan law (M.C.L. 500.2207), who may lawfully hold life insurance on another person's life?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
M.C.L. 500.2207 recognizes an insurable interest in one's own life and in the lives of family members, and policies on a spouse or parent-child relationship receive protection from the insured's creditors under the Michigan Insurance Code. The insurable-interest requirement ensures the policyowner has a legitimate relationship to the insured rather than a wager on the person's life.
Why the other options are wrong
- A) Michigan law does not give employers unlimited insurable interest in employees; the recognized bases are the applicant's own life and close family relationships, subject to the consent rules.
- B) A stranger without an insurable interest or the insured's consent cannot insure another's life for his or her own benefit; premium payment does not create the interest.
- D) Creditors have no statutory right to insure debtors under M.C.L. 500.2207; self and family are the recognized interests.
Memory hook
Insure yourself or your family — not your neighbor.