Effect of Cessation of the Beneficiary's Insurable Interest in the Life of the Insured Prior to Maturity of the Contract

In the chapter on "Insurable Interest" it was stated as a general rule that a person has an insurable interest in his own life and may accordingly insure that life to any amount and name anyone as beneficiary under the policy, even though such beneficiary may not have an insurable interest at the time. The only general exception to this rule, we saw, consisted of. those instances where the policy is a mere cover for fraud or speculative insurance and thus an evasion of the law against wagering. But assuming that the policy is taken out legally by one person on the life of another, or that a beneficiary has been appointed who has an insurable interest at the time, will a subsequent loss of that interest before the maturity of the contract adversely affect the vested rights of such beneficiary ? Here the prevailing rule holds that a policy valid at its inception because supported by an insurable interest will not, unless its provisions clearly stipulate the contrary, be affected thereafter by a loss of that interest on the part of the beneficiary. A married woman, for example, named as beneficiary in her husband's policy has been held to have the right to maintain the existence of the policy following a divorce and be entitled to the proceeds upon the insured's death. Exceptions to this rule frequently exist as regards creditors, as noted in the preceding chapter; certificates or rules of fraternal and mutual benefit societies, however, usually provide that the relation of husband and wife, or other family relationship under consideration, must exist at the time of the insured's death.