Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)General InsuranceHard
The principle of 'insurable interest' in property and casualty insurance requires that the insured must stand to lose financially if the insured property is damaged or destroyed. At what point in time must this insurable interest exist for a property policy to be valid?
- AAt the time of policy inception, the time of loss, and during the policy period.
- BOnly at the time of the loss.
- CAt the time of policy inception and at the time of loss.
- DOnly at the time of policy inception.
Show answer & explanationAnswer & explanation
Correct answer: B. Only at the time of the loss.
For property and casualty insurance, insurable interest must exist at the time of the loss. While it typically exists at policy inception, it is not strictly required. The key is that the insured must suffer a financial loss when the damage occurs.
Why the other options are wrong
- A. Existence during the policy period is implied if at inception and loss, but the critical legal point is at loss.
- C. This is often true in practice, but legally, only at the time of loss is strictly required for property/casualty.
- D. While often present, it's not strictly required only at inception; it's critical at loss.
Insurable Interest (P&C)
The financial stake an individual has in the property or person being insured, such that they would suffer a financial loss if the insured event occurs.
- Must exist at the time of loss for P&C insurance.
- Prevents gambling and moral hazard.
- Examples: ownership, mortgage holder, bailee.
Memory trick: P&C: At the time of loss, your interest must be boss.