Bethlen Almanac 1998 (Ligonier)
The Hungarian Reformed Federation of America
The Nuts and Bolts of the Insurance World Insurable Interest and Beneficiaries How and Why They’re Interdependent In order to prevent the use of life insurance as a means of deriving a fraudulent monetary benefit upon the death of an insured person, it is the common practice to have rules forbidding the issue of policies in which the beneficiary does not have an insurable interest in the life of the insured person. First, it is clearly evident that each person has an insurable interest in his own life and policies can be issued with the face amount payable to the estate of the insured life. However, the common situation is for the insured person to name a beneficiary to receive the benefits of the insurance, but the beneficiary must have an insurable interest in the life of the insured. The most common case is the insurable interest which exists between husbands and wives. And, there is a limited insurable interest between a parent and a child. That is the parent can insure the life of a child but the loss arising from the death of a young child is very different from the monetary loss that occurs on the death of a husband or wife. So the common case is to have the husband insuring their life for the benefit of the wife and/or children or the husband insuring the wife for the benefit of the husband and/or children. The not so common cases are the use of life insurance to provide for the loss which can arise between persons (or a person and a corporation) who are parties involved with a pecuniary interest. That is partners in a business have an insurable interest in the life of the co-partners. And a creditor has an insurable interest in the life of his debtor. A corporation has an insurable interest in the officers or key employees. However, note that the amount of insurance in these non-family situations may be limited, for example in a creditor/debtor situation the face amount should have a reasonable relationship to the amount of the debt. Frank Stokes, HRFA Consulting Actuary 21
