In property and casualty insurance, when must insurable interest exist for a loss to be covered?

In property and casualty insurance, insurable interest must exist at the time of the loss for coverage to apply. This requirement ensures that the policyholder has a legitimate stake in the property or subject matter being insured, which serves to reduce moral hazard. When a person stands to benefit from the preservation of an asset or suffers a financial loss from its destruction, it reinforces the logical rationale for the insurance contract.

If insurable interest does not exist at the time of the loss, any claim made may not be valid, as the insurer is entitled to rely on the expectation that the insured will not wish for a loss to occur. This principle upholds the integrity of the insurance system and protects against potential fraud or abuse.

Other time frames—such as before the policy is issued, at the time of claim submission, or after the loss occurs—do not meet the necessary criterion for insurable interest to be valid for coverage. Having insurable interest before a policy is issued is important for the formation of the contract, but the critical factor for a claim is the presence of that interest at the time the loss actually occurs.