According to life insurance contract law, when does insurable interest exist?

Insurable interest is a fundamental principle in life insurance that establishes a valid interest in the life of the insured by the policyholder. This principle is crucial because it helps prevent insurance from becoming a gambling or speculative venture. Insurable interest must be present at the time the policy is initiated, which is effectively when the application for the insurance coverage is submitted.

At this point, the policyholder must have a legitimate interest in the life of the insured, whether that be a financial interest or a close personal relationship. This means that the individual would suffer a financial loss or hardship upon the death of the insured person. Without insurable interest at the application stage, the contract would be considered voidable, as it lacks the necessary legal grounding to enforce it.

Other moments, such as the time of payout, renewal, or premium payment, do not establish or negate the insurable interest requirement. The emphasis on the application stage reinforces the notion that insurance should only be taken out on lives where a genuine relationship exists, ensuring that only those with legitimate stakes in the life of the insured can purchase life insurance policies.