The Time and Continuity of Insurable Interest

Recent cases affecting insurance on property exhibit a strong tendency to apply the rule that an insurable interest existing at some time during the risk and at the time of the loss is sufficient to validate the policy., and that it is unnecessary to have the interest exist at the time of the issuance of the contract. As regards life insurance the weight of authority is to the opposite effect, i.e. the interest must exist at the time the contract is made, and a policy, valid at its inception, will not thereafter be voided if it should happen that the interest ceases before the maturity of the contract, unless the provisions of the policy are such as to bring about that result. Indeed, the courts have decided that a policy naming a married woman as beneficiary remains in force even though she obtains a divorce before the insured's death. The principal cases which are exceptions to the aforementioned general rule refer chiefly to the insurable interest of creditors and assignees. Here a certain group of cases hold that the assignee of a life-insurance policy, even though valid when issued, must nevertheless possess an insurable interest. The United States Supreme Court has also decided (144 II. S. 621) that "if the policy of insurance be taken out by a debtor on his own life naming a creditor as beneficiary, or with a subsequent assignment to the creditor, the general doctrine is that on payment of the debt the creditor loses all interest therein and the policy becomes one for the benefit of the insured and collectible by his executors or administrators".