Which of the following family relationships generally constitutes an insurable interest?

• A. I only
• B. Neither I nor II
• C. II only
• D. Both I and II

Answer: (B)

Insurable interest in life insurance means the policyowner would suffer a financial loss or have a meaningful beneficial interest if the insured dies, and that interest must exist at the time the policy is issued. This requirement prevents policies from being taken out by someone who would not be harmed by the loss of the insured.

Among family relationships, insurable interest is typically present in close, economically dependent ties—such as spouses, parents and children—where there’s a clear potential for financial or support loss if the insured dies. Not all family relationships, however, create that kind of stake. Distant relatives or relationships where there is no financial dependence or concrete benefit generally do not establish insurable interest.

So, when the two specified family relationships do not involve a financial or dependent interest common to insurable relationships, neither one generally constitutes an insurable interest. That’s why both are not considered insurable interests in this context.