A California business wants to insure the life of its star salesperson, and the salesperson's spouse also wants to insure the same life. Which statement is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Two different bases create insurable interest here. The business faces a clear economic loss if the salesperson dies, satisfying the financial-loss test under California Insurance Code Section 10110. The spouse has an insurable interest based on the close marital relationship and the presumed loss of love, affection, and support. Each party may own a policy on the salesperson's life, and each policy must independently satisfy Section 10110. Multiple parties can insure the same life when each holds a valid interest, subject to underwriting and the insurer's evaluation of the combined exposure.
Why the other options are wrong
- B) The spouse's marital interest is valid and independent of the business's economic interest. The two interests are not exclusive of one another.
- C) The business's economic interest is valid and independent of the spouse's marital interest. Both may coexist.
- D) Employment status is irrelevant. The salesperson is fully insurable by any party that holds a valid insurable interest, including the spouse and the business.
Memory hook
Love and money both count; spouse and business can each insure the same life.