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Protective® is a registered trademark of Protective Life Insurance Company. The Protective trademarks logos and service marks are property of Protective and are protected by copyright, trademark, and/or other proprietary rights and laws.
Protective and Protective Life refer to Protective Life Insurance Company (PLICO) and its affiliates, including Protective Life and Annuity Insurance Company (PLAIC). PLICO, founded in 1907, is located in Nashville, TN, and is licensed in all states excluding New York. PLAIC is located in Birmingham, AL, and is licensed in New York. Product availability and features may vary by state. Each company is solely responsible for the financial obligations accruing under the products it issues. Product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Securities offered by Investment Distributors, Inc. (IDI) the principal underwriter for registered products issued by PLICO and PLAIC, its affiliates. IDI is located in Birmingham, Alabama.
Insurance and Annuities are: Not a Deposit | Not Insured by any Federal Government Agency | Have no Bank or Credit Union Guarantee | Not FDIC/NCUA Insured | May Lose Value
Insurable interest is established when there is a reasonable expectation of monetary benefits from either the continued existence of the insured person or entity or from the loss of the insured person or entity.
The policyowner must have a valid financial interest in the person or item being insured at the time of contract purchase, not necessarily at the time of claim. However, the consent of the insured person is required. Insurance would be unenforceable and considered a wager (or bet) if the policyowner did not have an insurable interest in the insured.
A person has an insurable interest in something when loss or damage to the insured would cause that person to suffer a financial loss or certain other kinds of losses.
So we've learned that a basic requirement for all types of insurance is that the person who buys a policy must have an insurable interest in the subject of the insurance. People are presumed to have an insurable interest in any property they own or which is in their possession. For purposes of life insurance, everyone is considered to have an insurable interest in their own life as well as in the lives of their spouses and dependents.For property and casualty insurance, the insurable interest must exist both at the time the insurance is purchased and at the time a loss occurs. For life insurance, the insurable interest only needs to exist at the time the policy is purchased.
- Love and Affection is interest that developed through marriage.
- Blood Relationships such as a parent, child or sibling.
- Economic Interests such as key person insurance, i.e., a mortgage company on the life of the mortgagee, an automobile finance company on the life of the auto purchaser, etc.
Who can have insurable interest and when must it exist?
Helpful Hint
Stranger-Originated Life Insurance (STOLI)
STOLI is also called Investor-Originated Life Insurance (IOLI).
Most STOLI sales typically target seniors. These are life insurance arrangements where investors persuade consumers to take out new life insurance policies with the investors named as beneficiary. Investors loan money to the insured to pay the premiums and the insured ultimately assigns ownership of the policy to the investors, who receive the death benefit when the insured dies.
Because the investors are the constructive applicants, owners, and beneficiaries of the policies, and they have no insurable interest in the insureds, many states view STOLI arrangements as fraudulent.