At what point must insurable interest exist on a life insurance policy?

Insurable interest in a life insurance policy must exist at the time the application is taken. This requirement is fundamental to the concept of life insurance, ensuring that the applicant has a legitimate financial interest in the continued life of the insured person. The principle of insurable interest serves to prevent moral hazard, where someone might be incentivized to cause harm if they stand to gain financially from a policy payout.

In the context of an insurance contract, insurable interest ensures that the policyholder has a stake in the insurance's good outcome, thus establishing a legitimate purpose for the coverage. If insurable interest does not exist at the time of the application, the contract may be deemed void because the essential risk-sharing element is absent.

While the existence of insurable interest at policy renewal, the time of claim, or before cancellation is relevant in other areas of insurance, it is specifically required at the application stage for life insurance to be valid from the outset.