Florida Life and Health Insurance License Practice Test 2025 – The Complete All-in-One Guide for Exam Success!

Insurable interest is a fundamental concept in life insurance that ensures the policyholder has a legitimate interest in the continued life of the insured. This principle is primarily concerned with financial interest; in other words, a person can only purchase a life insurance policy on someone else's life if they would suffer a financial loss in the event of the insured's death.

This requirement protects against moral hazard, which refers to the increased risk that can occur when someone stands to gain financially from a person’s death. It ensures that the purchase of life insurance is not made for speculative reasons but rather to provide financial security.

While emotional attachments, such as love or friendship, may indeed motivate someone to take out a policy, they do not fulfill the legal requirement for insurable interest as outlined in insurance laws. Likewise, professional relationships or the mere absence of conflicting interests do not represent a recognized basis for establishing an insurable interest. The core focus remains on the financial implications tied to the life of the insured, thus reinforcing the need for insurable interest to be grounded in a financial context.