When must insurable interest exist in property insurance?

In property insurance, the requirement for insurable interest is that it must exist at the time of loss. This principle protects the integrity of the insurance contract, ensuring that the policyholder stands to suffer a financial loss if the insured property is damaged or destroyed. If insurable interest is not present at the time of loss, the insurer may deny the claim because there is no valid risk to insure; the purpose of insurance is to mitigate the loss incurred by the policyholder, who must have a legitimate financial stake in the property.

Having insurable interest at the time of policy issuance, while relevant for establishing the contract, does not fulfill the crucial requirement that it must continue to exist when a loss occurs. If a policyholder no longer has an insurable interest in the property at the time of loss, the justification for the insurance policy essentially disappears, thus eliminating the purpose of the coverage. Similarly, the timing of claim filing or premium payment does not affect the necessity for insurable interest at the moment of the actual loss event. Only when a loss occurs and the policyholder has a vested interest can the claim be justifiably made.