When must insurable interest be present for a life insurance contract to be valid?

For a life insurance contract to be valid, insurable interest must be present at the inception of the contract. Insurable interest refers to a legitimate interest in the continued life of the insured, which means the policyholder would suffer a financial or emotional loss if the insured were to pass away.

This requirement protects insurance companies from fraudulent claims and prevents individuals from taking out life insurance policies on people with whom they have no meaningful relationship, thus ensuring the ethical nature of the transaction.

While insurable interest is essential at the time the contract is initiated, such as when the application is filled out and the policy is issued, it is not necessary to maintain insurable interest throughout the life of the contract or specifically at the time of renewal. The focus is on the initial establishment of the policy, making it a key principle in underwriting and life insurance law.