State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Under California Insurance Code Section 10110, the policyowner of a disability policy must have an insurable interest in the insured:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 10110 requires that an insurable interest in the insured exist when a life or disability policy is entered into. The timing matters because it distinguishes insurance from a wager: a person may not purchase a policy on another life or health merely to gamble on its occurrence. The interest is needed at inception, not at claim time. This contrasts with property insurance, where the insurable interest generally must exist at the time of the loss.
Why the other options are wrong
- B) Requiring the interest only at claim time would allow wagering contracts to exist, which the statute is designed to prevent.
- C) The timing requirement attaches to contract formation, not to when premiums are paid off.
- D) Insurable interest is not limited to family; business relationships such as key-person interests also qualify.
Memory hook
Life and disability: interest at the start. Property: interest at the crash. Different clocks, different rules.