For life insurance coverage to remain valid, when must insurable interest exist?

Insurable interest is a fundamental principle in life insurance that requires the policyholder to have a genuine interest in the continued life of the insured. This principle helps prevent insurance from being used as a gambling mechanism or as a means to profit from someone's death.

For life insurance coverage to remain valid, insurable interest must exist at the inception of the policy. This means that when the policy is first issued, the policyholder must have a legitimate reason to want coverage on the insured person, such as a familial or financial relationship. If insurable interest does not exist when the policy is initiated, the contract may be deemed void since it lacks a foundational principle.

This principle should be understood in contrast to the notion that insurable interest must continue throughout the life of the policy. In most cases, after the policy has been issued, there is no requirement for the policyholder to maintain insurable interest for the duration of the policy. Thus, once it’s established at the beginning, the policy remains valid regardless of any changes in the relationship between the insured and the policyholder. This allows individuals to take out life insurance on loved ones or partners with whom they have a vested interest without needing to reassess that interest continually.