Utah Life Producer Practice Exam

The concept of insurable interest is fundamental in the insurance industry, as it refers to the requirement that the person purchasing insurance must have a lawful and substantial interest in the subject matter of the insurance. This means that they would suffer a financial loss, or some form of hardship, should an insured event occur. For example, if you insure your home, you have an insurable interest because you would lose property and possibly face financial difficulties if it were damaged or destroyed.

In contrast, non-insurable interest refers to situations where a person does not have a rightful stake in the insured property, making it invalid to purchase insurance on it. Public interest pertains to matters that serve the welfare of the general public, and private interest relates to personal stakes that do not necessarily constitute a lawful basis for insurance. Therefore, insurable interest is the correct term that specifically addresses the lawful aspect tied to the ability to purchase an insurance policy.