Which statement accurately represents the concept of insurable interest?

The concept of insurable interest is a fundamental principle in insurance that requires the policyholder to have a legitimate interest in the continued life or well-being of the insured person or property at the time the insurance policy is initiated. Hence, stating that insurable interest must exist at the time of application aligns perfectly with this principle. It ensures that the policyholder would face financial loss or hardship if the insured event were to occur, which prevents the potential for moral hazard or insurance fraud.

Establishing insurable interest after the application would undermine the integrity of the insurance contract, as it could give rise to scenarios where someone might take out insurance on an individual or property they have no legitimate financial stake in. Similarly, the requirement for insurable interest applies across various types of insurance, not just health insurance. Finally, while there may be discussions and agreements between parties concerning insurance contracts, the legal requirement for insurable interest does not hinge solely on mutual agreement; it is a universally recognized standard that must be satisfied to validate the contract.