Insurable interest exists when
A) Cobb has insurance on a car he just sold,
B) Whitten lends Umble $20,000 to buy a home and buys insurance on the home,
C) Jones, a student, buys fire insurance on the College of Business,
D) all of these.

Question

Quizplus · Accepted Answer

Insurable interest exists when the policyholder stands to suffer a financial loss if the insured event occurs. In choice B, Whitten has a financial interest in the home because he lent money to Umble to buy it, and thus would suffer a financial loss if the home were damaged or destroyed. Choices A and C do not demonstrate a direct financial loss to the policyholder if the insured event occurs.

Insurable Interest Exists When