Under what condition does an insurable interest exist?

An insurable interest exists when a person has a legitimate interest in the continued life, health, or property of the individual or entity being insured. This is fundamentally based on the principle that one will suffer a financial loss or hardship upon the death or disability of the insured. For example, a spouse or parent would have an insurable interest in their partner or child since their financial and emotional well-being would be affected by the loss of that person.

In the context of the options provided, having someone benefit from another's continued life accurately captures the essence of insurable interest. This situation exemplifies the necessary connection between the insured and the policyholder, reinforcing the validity of the risk being insured against. Such relationships are key in justifying the issuance of an insurance policy, as it prevents insurance from being used as a gambling tool where individuals might seek to profit from another's misfortune without any legitimate connection. Thus, the presence of an insurable interest not only legitimizes the insurance contract but also aligns with the ethical framework governing the insurance industry.