New York State Life Insurance Exam Questions Practice Question
When is insurable interest required?
Correct Answer: B
Rationale: Insurable interest must be established at the time of application to ensure that the applicant has a legitimate stake in the insured's well-being. This principle prevents moral hazards and fraud, as it ensures that the policyholder would suffer a financial loss in the event of a claim.
Option A is incorrect because insurable interest is not assessed at the time of a claim; it must be present when the policy is initiated. Option C is misleading, as insurable interest is not specifically required for policy loans. Option D is also incorrect; while insurable interest is relevant to the policy's validity, it is not limited to the first year of death but must be established at the outset.
Unlock All Questions
Subscribe to Premium for full access to all practice questions, detailed rationales, and performance tracking.
Subscribe Now