Under what condition must an applicant have insurable interest in the property?

An applicant must have insurable interest in the property at the time of the loss for coverage to be valid. Insurable interest refers to a financial stake in the property, meaning that the insured would suffer financially if the property were damaged or destroyed. This requirement protects the insurance market from fraudulent claims, as it ensures that individuals cannot profit from an insurance policy on property they do not own or have a legitimate financial interest in.

If an applicant does not have insurable interest when the loss occurs, any claim made may be denied due to the absence of this crucial element. The principle of insurable interest is primarily designed to prevent moral hazard and ensure that insurance fulfills its role as a risk management tool.

It is important to recognize that insurable interest must exist not just at the time of purchasing the policy but must also be maintained throughout the policy's life, specifically at the time a loss takes place. This ongoing requirement helps to ensure that the insured continues to have a legitimate reason to claim the insurance for potential losses during the policy period.