Arizona Life and Health Practice Exam

In terms of insurable interest, how is one's own life regarded legally?

1. Generally limited

2. Generally unlimited

3. Generally contingent

4. Not applicable

The correct answer is: Generally unlimited

In legal terms, one's own life is regarded as having insurable interest generally unlimited. This means that an individual is always considered to have an insurable interest in their own life. The rationale behind this is straightforward: a person has a vested interest in their continued existence, as their life impacts not only their well-being but also their financial obligations, dependents, and numerous other aspects of their life. When it comes to issuing life insurance policies, insurers recognize that the person taking out the policy on their own life has something to lose financially if they were to pass away, which justifies the insurable interest. This legal principle ensures that the individual can secure coverage without facing scrutiny regarding the legitimacy of their relationship to the life insured, as is required when insuring another person’s life. In contrast, the other options suggest limitations or contingencies on insurable interest, which do not apply when it comes to one's own life. Therefore, the recognition of the unlimited nature of insurable interest in this context solidifies the rationale for why individuals can take out life insurance policies on themselves without additional conditions.