Patty, who is divorced, owns a house. She has no reasonable expectation of benefit from the life of Quinn, her ex-spouse, but she applies for insurance on his life anyway. She also obtains a fire insurance policy on the house, which she later sells. Five years later, Quinn dies and the house is destroyed in a fire. Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.

Question

What will be an ideal response?

Answer 1

Patty cannot obtain payment on the death of Quinn or for the loss of the house. To obtain insurance, one must have a sufficiently substantial interest in whatever is to be insured. One has an insurable interest in property if one would suffer a pecuniary loss from its destruction. This interest in property must exist when the loss occurs. To obtain insurance on another's life, one must have a reasonable expectation of benefit from the continued life of the other. The benefit may be founded on a relationship, but "ex-spouse" alone is not such a relationship. An interest in someone's life must exist when the policy is obtained.