Insurable interest is a fundamental concept in the realm of life insurance and refers to the financial interest that the policyholder must have in the continued life of the insured individual. For a life insurance policy to be valid, insurable interest must be present at the time the policy is issued. This principle ensures that life insurance is used as a financial tool rather than as a speculative investment.

Insurable interest exists when the policyholder can demonstrate a legitimate financial interest in the insured person staying alive. This interest is typically associated with familial, economic, or business relationships. Common examples include a spouse insuring the life of their partner, parents insuring the lives of their children, or business partners having policies on each other to protect the financial interests of the business.

It's important that the insurable interest is present at the inception of the policy, but it doesn't need to persist for the entire duration of the policy. In other words, if the insurable interest exists when the policy is purchased, and the policyholder later loses that interest (for example, due to divorce or a change in business partnerships), the policy generally remains in force.

The requirement of insurable interest safeguards against the potential misuse of life insurance for speculative or nefarious purposes. It ensures that life insurance serves its intended purpose of providing financial protection to those who would suffer a genuine loss in the event of the insured's death. Failure to establish or maintain insurable interest can lead to the invalidity of a life insurance policy.

While group life insurance offers several advantages, there are specific statements about it that may be misleading or incorrect. One such incorrect statement could be related to the portability of coverage.

An incorrect statement might suggest that group life insurance coverage is always portable, meaning that individuals can easily take their coverage with them if they leave the group, such as changing jobs or retiring. In reality, the portability of group life insurance varies depending on the policy and the terms set by the employer or insurance provider. Some group life insurance policies offer portability options, allowing individuals to convert their group coverage to an individual policy upon leaving the group, but this often comes with certain conditions and limitations.

In truth, the portability of group life insurance is not universal, and individuals should carefully review the terms of their group policy to understand whether portability is an option and what conditions might apply. Assuming automatic or guaranteed portability without verifying the policy terms could lead to misunderstandings and potential gaps in coverage during periods of transition. It's essential for individuals covered by group life insurance to be informed about the specific features of their policy to make well-informed decisions regarding their life insurance coverage.