What must exist at the time of application for a potential financial hardship in insurance?

The correct answer is that insurable interest must exist at the time of application for a potential financial hardship in insurance. Insurable interest refers to the requirement that the policyholder must have a legitimate interest in the life or property that is being insured. This means that the policyholder would suffer a financial loss or hardship if the insured event were to occur.

For example, when an individual takes out a life insurance policy on someone else's life, they need to demonstrate that they will face a financial impact due to that person's death, such as being a spouse or a business partner. This principle is crucial as it helps prevent insurance from being used as a speculative investment or a betting mechanism; it ensures that insurance is meant to provide financial protection rather than to create a profit from another's misfortune.

Other options like no loss history, legal binding, and a contract of adhesion do not directly relate to the requirement of having insurable interest at the time of application. No loss history pertains to underwriting considerations rather than the initial requirement for purchasing insurance. Legal binding refers to the enforceability of contracts but does not address the necessity of having a vested financial interest. A contract of adhesion describes how insurance contracts are often presented, indicating that one party (the insurer) has significantly