Chartered Life Underwriter Practice Exam

The scenario where there is not an insurable interest is when a business owner has an insurance policy for a customer. Insurable interest requires a legitimate interest in the preservation of the life or property insured, which means that the loss of that life or property would cause some sort of financial or emotional hardship to the insured party. In this context, a business owner does not have an insurable interest in their customers because they would not suffer a direct financial loss that comes from the death or incapacity of a customer. The relationship between a business owner and a customer is transactional; while the customer is important to the business, their death does not entail a measurable financial loss for the business owner, unlike the other relationships presented. In contrast, parents have an insurable interest in their children due to emotional and financial dependency. Business partners share an insurable interest with each other, as the loss of a partner can directly impact the business and the remaining partner's financial security. Siblings may also have an insurable interest, particularly if there are financial implications, such as shared assets or dependencies.