A woman buys a life insurance policy on her business partner and pays the premiums for several years. She later sells her share of the business, so she no longer has any financial tie to the partner. Under Va. Code § 38.2-302, what is the effect of that change on the policy?
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Why B is correct
Va. Code § 38.2-302 fixes the timing of the insurable-interest requirement: for life insurance, the interest must exist when the policy is originally obtained. A policy written when a genuine insurable interest existed does not become void merely because that interest later disappears — the partner here held a business relationship supporting the coverage at inception, so the sale of her business share does not undo the policy. This is why life insurance is analyzed differently from many other contracts that must remain supported by consideration throughout their term.
Why the other options are wrong
- A) The statute tests insurable interest at inception; a later loss of the underlying interest does not void a life policy that was properly written.
- C) A policy valid when issued never becomes a wager contract merely because circumstances changed; Va. Code § 38.2-302 does not provide for automatic conversion.
- D) Continued coverage does not depend on a fresh consent from the former partner; the timing rule under Va. Code § 38.2-302 looks to the inception of the policy.
Memory hook
Insurable interest is a wedding ring, not a lease — needed at the start, not renewed afterward.