Florida Insurance Licensing Practice Exam

All of the following describe insurable interest EXCEPT:

1. It must exist at the time of the loss

2. It must exist for insurance to respond

3. Shows a similarity between insurance and wagering

4. The insured would suffer an economic loss

The correct answer is: Shows a similarity between insurance and wagering

Insurable interest is a principle in insurance that refers to the financial or legal interest that an individual has in the subject of insurance. It is important because it helps to ensure that people do not take out insurance policies on things they do not own or have no financial interest in. This principle also helps to distinguish insurance from gambling or wagering. Option A is incorrect because insurable interest must exist at the time of the loss for insurance to be applicable. Option B is incorrect because insurable interest is necessary for insurance to respond and pay out a claim. Option D is incorrect because the insured does not necessarily have to suffer an economic loss for insurable interest to exist. In some cases, the insured may have an emotional or personal interest in the subject of insurance.