Under CIC Section 10110, who must have an insurable interest in the insured's life for a life insurance policy to be valid?

Why D is correct

CIC Section 10110 requires the person who takes out and owns a life insurance policy to have an insurable interest in the insured's life at the time the policy is issued. The policyowner must stand to suffer a genuine financial loss from the insured's death — through love and affection in close family relationships or through a pecuniary interest in business and creditor situations. The beneficiary does not need an insurable interest, and neither the insurer nor the agent is subject to the requirement; their roles are entirely different.

Why the other options are wrong

• A) The beneficiary merely receives the proceeds and needs no insurable interest; a person may name anyone as beneficiary.
• B) The insurer assumes the risk in exchange for premium and is not required to hold an insurable interest in the insured.
• C) The agent represents the insurer in selling the policy and is not a party to the insurable interest requirement.

Memory hook

The buyer, not the payee, must have the interest.

Why A is correct

Section 10110 requires the person who takes out the policy, the policyowner, to have an insurable interest in the insured's life at the time the policy is issued. The statute lists the recognized interests: the person's own life, persons on whom the owner depends for education or support, persons under a legal obligation to the owner, and persons on whose life an estate vested in the owner depends. The beneficiary, by contrast, does not need an insurable interest in the insured.

Why the other options are wrong

• B) A beneficiary may be anyone the owner chooses and is not required to have an insurable interest in the insured's life.
• C) The agent is not a party to the contract and needs no insurable interest; the agent's role is limited to selling the policy.
• D) An employer must have an insurable interest in key employees, but that is a specific business case, not a universal requirement that an employer be involved at all.

Memory hook

The owner must care enough to insure the life. Beneficiary? Anyone. Owner? Must have a genuine stake in that life.