Washington Life Producer Practice Exam

Insurable interest does NOT exist in which of the following relationships?

1. Husband and wife

2. Business owner and business client

3. Parent and child

4. Friend and friend

The correct answer is: Business owner and business client

Insurable interest is a fundamental principle in insurance that requires a policyholder to have a legitimate interest in the life or property of the insured entity. This principle ensures that insurance is used for protection rather than as a means of gambling or speculation. In the context of the options provided, the relationship in which insurable interest does not typically exist is between friends. While friends may care for each other and wish to help one another in times of need, the legal and financial interests that form the basis of insurable interest are generally not present in casual friendships. Insurable interest usually requires a more significant emotional or financial stake, such as those found in familial or business relationships. On the other hand, the relationships of husband and wife, parent and child, and business owner and business client are characterized by the necessary insurable interest. A husband and wife have a shared financial and emotional stake in each other's lives. Similarly, parents have a vested interest in the wellbeing of their children. In the business context, business owners gain from their clients' survival and success in terms of potential income and reputation. These relationships provide the legal foundation for insuring lives or properties involved. Therefore, the absence of insurable interest in a friendship underscores the necessity of a deeper economic or