Ace the Chartered Life Underwriter Challenge 2026 – Secure Your Success and Dominate the Exam!

An individual demonstrating an insurable interest in another person's life is primarily concerned with an economic interest linked to the continued existence of the insured. This means that the person looking to insure another's life stands to lose financially or materially if the insured were to pass away. The principle of insurable interest is central to life insurance and serves to prevent moral hazard, ensuring that individuals do not take out policies on lives they have no legitimate interest in.

In contrast, having a close friendship, belonging to a specific profession, or merely having financial debt does not inherently create an insurable interest. While a close friend may evoke emotional ties, emotional bonds alone do not substantiate a financial interest in someone’s life. Similarly, simply being part of a particular profession does not guarantee that an economic interest exists. Lastly, having a significant financial debt may create urgency but does not establish an insurable interest in the absence of a direct economic stake in the insured's life.

Therefore, recognizing an economic interest as the basis for insurable interest is foundational and aligns with the principles governing life insurance contracts.