Under North Carolina insurance law, when must an insurable interest exist in a life insurance contract?

Why C is correct

Under North Carolina common law, an insurable interest in the life of the insured must exist at the inception of the policy; it need not exist at the time of the insured's death. This is why a beneficiary named at issue retains the death benefit even if circumstances change and the beneficiary no longer has an interest in the insured's life when death occurs. The timing rule prevents wagering contracts at issue without penalizing later changes. This reflects North Carolina common law, as applied through the policy-provisions framework of G.S. 58-58-22.

Why the other options are wrong

• A) Requiring insurable interest only at death reverses the North Carolina common law rule; the requirement attaches at inception.
• B) North Carolina common law requires insurable interest at inception but does NOT require it to continue until death, so the both-times answer overstates the rule.
• D) The claim stage is irrelevant; the common law test is fixed at policy inception, not at the time a claim arises.

Memory hook

Interest at inception, not at the grave.