State RegulationsAZ specificDifficulty 1/5
Under Arizona insurance law, which of the following establishes an insurable interest in personal insurance through love and affection?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under A.R.S. 20-1104, a substantial interest engendered by love and affection exists for individuals closely related to the insured by blood or law, giving them an insurable interest in personal insurance. Other persons must show a lawful and substantial economic interest in the continued life, health, or safety of the insured. The practical consequence is that close family members may insure one another without proving financial loss, while outsiders cannot.
Why the other options are wrong
- B) A competitor has no relationship by blood or law and no lawful economic stake in the insured's continued life, so no insurable interest exists.
- C) A stranger's mere desire to invest is precisely the kind of interest arising only from the insured's death that A.R.S. 20-1104 excludes.
- D) A.R.S. 20-1104 expressly rejects interests arising only from death; an insurable interest must attach to the continuation of the insured's life, health, or safety.
Memory hook
Love and affection covers close kin; everyone else needs an economic stake in the living insured.