A licensed New York agent helps two business partners structure key-person life coverage on each other's lives. On what basis does each partner have an insurable interest in the other?

Why C is correct

Under N.Y. Ins. Law §3205, persons who are not close blood or marriage relatives must have a lawful and substantial economic interest in the continued life, health, and bodily safety of the person insured — and key-person and partner coverage rests on exactly that basis. The interest must be distinct from one arising only upon death, so it is the partner's ongoing value to the business, not the death itself, that supports the coverage.

Why the other options are wrong

• A) Love and affection is the basis §3205 reserves for close blood or marriage relatives; a business friendship, however long, does not qualify.
• B) §3205 requires an economic interest in the partner's continued life, health, and bodily safety; an interest arising only upon death is expressly insufficient.
• D) Neither the Department of Financial Services nor the Superintendent approves operating agreements as a substitute for the statutory insurable-interest test.

Memory hook

Partners insure the partner's working life, not the funeral.