What is a requirement for establishing insurable interest in a life or health insurance policy?

For establishing insurable interest in a life or health insurance policy, it is essential that the interest exist at the time of application. The principle of insurable interest mandates that the policyholder must have a legitimate interest in the continued life or health of the insured individual to prevent moral hazard and ensure the purpose of insurance is upheld.

This requirement protects the integrity of the insurance system by ensuring that individuals are not taking policies on others with whom they have no meaningful relationship, thereby preventing fraudulent claims or exploitation of the insurance mechanism. While the concept of insurable interest often applies to financial relationships, it also encompasses personal relationships, such as those between family members, indicating that such bonds can also satisfy the requirement as long as they exist at the time of application.