Two business partners take out life insurance policies on each other through the same insurer. Years after the policies are issued, the partnership dissolves, and one partner dies with the policy still in force. Under North Carolina common law, is the death claim payable?

Why A is correct

Under North Carolina common law, an insurable interest in a life insurance policy must exist when the policy is issued, at inception; it need not exist at the insured's death. This reflects North Carolina common law, as applied through the policy-provisions framework of G.S. 58-58-22. Because the partners had an insurable interest in each other when the policies were issued, the later dissolution of the partnership does not defeat the death claim.

Why the other options are wrong

• B) Demanding the interest at death is the property-insurance timing rule; life insurance in North Carolina is judged at inception.
• C) A validly issued policy does not become void when the underlying relationship ends; the beneficiary keeps the full death benefit.
• D) No reacquisition is required; the inception requirement was satisfied when the partners bought the policies.

Memory hook

Insurable interest is judged at the door - inception, not death.