Claims Adjuster Practice Exam 2025 - Free Claims Adjuster Practice Questions and Study Guide

Question: 1 / 400

Define "insurable interest."

The right to receive a premium refund

The financial stake a policyholder has in the insured property or individual

Insurable interest is defined as the financial stake that a policyholder has in the insured property or individual. This concept is fundamental in insurance because it ensures that the policyholder has a legitimate interest in the preservation or safety of the property or person being insured.

For example, if someone owns a house, they have an insurable interest in that property because any damage or loss to the home would impact their financial wellbeing. This principle prevents insurance policies from being used for wagers or speculative purposes, as there must be a direct correlation between the policyholder's financial loss and the insured risk.

Having insurable interest is essential for a valid insurance contract. It ensures that the insurance operates as intended—to provide financial protection against losses that the policyholder would legitimately suffer. Hence, the definition as stated accurately captures the essence of insurable interest in the insurance industry.

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The requirement for an insurance agent to represent the client

The expectation of payment from the insurance company

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