Insurable Interest; Personal Insurance

  1. Law
  2. Georgia Code
  3. Insurance
  4. Insurance Generally
  5. General Provisions
  6. Insurable Interest; Personal Insurance

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  1. An insurable interest, with reference to personal insurance, is an interest based upon a reasonable expectation of pecuniary advantage through the continued life, health, or bodily safety of another person and consequent loss by reason of such person's death or disability or a substantial interest engendered by love and affection in the case of individuals closely related by blood or by law.
  2. An individual has an unlimited insurable interest in his or her own life, health, and bodily safety and may lawfully take out a policy of insurance on his or her own life, health, or bodily safety and have the policy made payable to whomsoever such individual pleases, regardless of whether the beneficiary designated has an insurable interest.
  3. The trustee of a trust established by an individual settlor has an insurable interest in the life of that individual settlor and has the same insurable interest in the life of any other individual as does such individual settlor. The trustee of a trust has the same insurable interest in the life of any other individual as does any beneficiary of the trust with respect to proceeds of insurance on the life of such individual or any portion of such proceeds that are allocable to such beneficiary's interest in such trust. If multiple beneficiaries of a trust have an insurable interest in the life of the same individual, the trustee of such trust has the same aggregate insurable interest in such individual's life as such beneficiaries with respect to proceeds of insurance on the life of such individual or any portion of such proceeds that is allocable in the aggregate to such beneficiaries' interest in the trust.
  4. A corporation, foreign or domestic, has an insurable interest in the life of any individual:
    1. Holding at least 10 percent of the issued and outstanding shares of such corporation; or
    2. In whom the shareholders holding a majority of the issued and outstanding shares have an insurable interest, whether arising out of their status as shareholders of the corporation or otherwise,

      and in the life or physical or mental ability of any of its directors, officers, or employees or the directors, officers, or employees of any of its subsidiaries or any other person whose death or physical or mental disability might cause financial loss to the corporation; or, pursuant to any contractual arrangement with any shareholder concerning the reacquisition of shares owned by him or her at the time of his or her death or disability, on the life or physical or mental ability of that shareholder for the purpose of carrying out such contractual arrangement; or, pursuant to any contract obligating the corporation as part of compensation arrangements or pursuant to a contract obligating the corporation as guarantor or surety, on the life of the principal obligor. The trustee of a trust established by a corporation for the sole benefit of the corporation has the same insurable interest in the life or physical or mental ability of any person as does the corporation. The trustee of a trust established by a corporation providing life, health, disability, retirement, or similar benefits to employees of the corporation or its affiliates and acting in a fiduciary capacity with respect to such employees, retired employees, or their dependents or beneficiaries has an insurable interest in the lives of employees for whom such benefits are to be provided. As used in this subsection, the term "employee" shall include any and all directors, officers, employees, or retired employees. The term "employee" shall include any former employee, but only for the purpose of replacing existing life insurance that will be surrendered in exchange for new life insurance in an amount not exceeding the insurance being surrendered.

  5. The insurable interest of a corporation or trustee which has been established pursuant to subsection (d) of this Code section shall be conveyed automatically to another corporation or to the trustee of a trust established by such other corporation for its sole benefit which has acquired by purchase, merger, or otherwise all or part of the first corporation's business. A corporation or the trustee of a trust established by such corporation for its sole benefit may exchange any policy of insurance issued to itself or to another corporation or the trustee of a trust established by such other corporation for its sole benefit from which the exchanging corporation has acquired by purchase, merger, or otherwise all or part of such other corporation's business for a new policy of insurance issued to itself without establishing a new insurable interest at the time of such exchange.
  6. A shareholder in a corporation has an insurable interest in the life of any other shareholder pursuant to any contractual arrangement between or among such shareholders concerning the purchase by surviving shareholders of shares owned by a deceased or disabled shareholder, for the purpose of carrying out such contractual arrangement.
  7. A partnership, limited liability company, business trust, or other business entity established under the laws of any state or of the United States shall have the same insurable interests as a corporation, as set forth in subsections (d) and (e) of this Code section, including, without limitation, insurable interests in such entity's partners, members, or holders of other equity ownership interests and in officers, directors, employees, and those of any subsidiaries of any such entity. The partners of a partnership, the owners of a limited liability company, and the owners of equity interests in any form of business entity have the same insurable interest in the lives of the other partners, members, or equity interest owners as do shareholders of corporations.
  8. An insurable interest must exist at the time the contract of personal insurance becomes effective but need not exist at the time the loss occurs.
  9. Any personal insurance contract procured or caused to be procured upon another individual is void unless the benefits under the contract are payable to the individual insured or such individual's personal representative or to a person having, at the time when the contract was made, an insurable interest in the individual insured. In the case of a void contract, the insurer shall not be liable on the contract but shall be liable to repay to the person or persons who have paid the premiums all premium payments without interest.
  10. A charitable institution as defined under Sections 501(c)(3), 501(c)(6), 501(c)(8), and 501(c)(9) of the Internal Revenue Code of 1986 shall have an insurable interest in the life of any donor.
  11. The insurable interests set forth in this Code section are not exclusive but are cumulative of and not in lieu of insurable interests existing in common law and not expressly set forth in this Code section.

(Code 1933, § 56-2404, enacted by Ga. L. 1960, p. 289, § 1; Ga. L. 1988, p. 317, § 1; Ga. L. 1989, p. 1109, § 1; Ga. L. 1991, p. 1123, §§ 1, 2; Ga. L. 1993, p. 1721, § 3; Ga. L. 1995, p. 776, § 2; Ga. L. 2003, p. 482, § 1; Ga. L. 2006, p. 869, § 1/HB 1484; Ga. L. 2019, p. 386, § 23/SB 133.)

The 2019 amendment, effective July 1, 2019, deleted the former second and third sentences of subsection (k), which read: "No part of this Code section specifically recognizing any insurable interest shall create any presumption or implication that such insurable interest did not exist prior to July 1, 2006. To the contrary, an insurable interest shall be presumed with respect to any life insurance policy issued prior to July 1, 2006, to any person whose insurable interest is recognized in this Code section."

OPINIONS OF THE ATTORNEY GENERAL

Common law definition not broadened.

- General Assembly, in defining "insurable interest" in this section, did not intend to broaden the common law definition. 1963-65 Op. Att'y Gen. p. 469.

Insurable interest may be based on kinship or pecuniary advantage.

- Language, "a substantial interest engendered by love and affection in the case of individuals closely related by blood or by law," as used in subsection (a) of this Code section, was intended to embrace the common law concept of an insurable interest recognized in individuals closely related by blood or by law; that is to say that the relationships of husband and wife, father and mother, son and daughter, and vice versa would constitute an insurable interest by virtue of their relationship alone, without showing a pecuniary interest or advantage; also, others closely related by blood or law would come within this same classification in cases of special circumstances in which they are substituted for one of the individuals creating this same close relationship; all other persons, in order to show an insurable interest, must satisfy the first part of this section relating to a pecuniary advantage. 1963-65 Op. Att'y Gen. p. 469.

Aunt or grandmother must have financial relationship for insurable interest.

- Aunt does not have sufficient insurable interest in the life of her infant niece or nephew, there being no financial dependency between them, to entitle the aunt to apply for and obtain a policy of life insurance upon the life of such niece or nephew, and under the same circumstances, a grandmother may not apply for such insurance. 1963-65 Op. Att'y Gen. p. 469.

Lifetime owner of policy with right to change beneficiary must have insurable interest.

- When the applicant, the lifetime owner of the policy, has control of the policy and therefore may change beneficiaries at any time during the life of the insured without regard to any consent being given by the previous beneficiary or the insured, such lifetime owner must satisfy the requirements of subsection (c) of former Code 1933 § 56-2405 (see O.C.G.A. § 33-24-3) with reference to insurable interest as well as former Code 1933 § 56-2407 (see O.C.G.A. § 33-24-6) with reference to consent of the insured. In order to satisfy subsection (c), the benefits of the policy must be payable to the individual insured or the insured's personal representative, or to a person having, at the time when such contract was made, an interest in the individual insured; in order to satisfy former Code 1933, § 56-2407, such lifetime owner, in order to come within the exception, must have an insurable interest in the life of the minor whose life is insured. The wording of "no life insurance . . . contract upon an individual . . . shall be made or effectuated . . ." clearly would include the applicant who is the lifetime owner regardless of whether such applicant or owner is the named beneficiary in the policy. 1963-65 Op. Att'y Gen. p. 469.

RESEARCH REFERENCES

Am. Jur. 2d.

- 43 Am. Jur. 2d, Insurance, § 757 et seq.

C.J.S.

- 44 C.J.S., Insurance, § 334 et seq.

ALR.

- Effect on insurance contract of wagering assignment thereof, 5 A.L.R. 837; 53 A.L.R. 1403.

Who are "blood relatives" within statute or rules as to beneficiaries of insurance in mutual benefit societies, 10 A.L.R. 864.

Insurance: insurable interest of fiance or fiancee, 17 A.L.R. 580.

Right of insolvent to insure life for benefit of relatives, 31 A.L.R. 51; 34 A.L.R. 838.

Effect of erroneous designation of beneficiary of insurance as "wife,", 32 A.L.R. 1481.

Divorce decree as affecting a change of ownership or interest within policy of insurance, 48 A.L.R. 1232.

Insurable interest in life of co-obligor, 50 A.L.R. 366.

Divorce of insured and beneficiary as affecting the latter's right in life insurance, 52 A.L.R. 386; 175 A.L.R. 1220.

Constitutionality, construction, and application of statutes relating to insurance on life of one person for benefit of another who has no insurable interest, 108 A.L.R. 449.

Life policy or collateral agreement under which benefits on death of one member of a group or class of policyholders who has no insurable interest in lives of one another are to be shared surviving members, as contrary to public policy as a wagering contract, 121 A.L.R. 725.

Insurable interest of employer in respect of injury or death of employee for which he is not legally responsible, 122 A.L.R. 1189.

Insurable interest of employer in life of employee, 125 A.L.R. 408.

Immoral relations between insured and beneficiary as affecting liability of insurer or rights in respect of proceeds policy, 173 A.L.R. 716.

Life insurance: right to raise question of lack of insurable interest, 175 A.L.R. 1276.

Rights and remedies under contract by party to procure insurance on his own life, 12 A.L.R.2d 983.

Insurable interest of partner or partnership in life of partner, 70 A.L.R.2d 577.

Insured's ratification, after loss, of policy procured without his authority, knowledge, or consent, 52 A.L.R.3d 235.

Payment of premiums by corporation on corporate officer's life insurance policy as affecting right to policy, 56 A.L.R.3d 1086.

Divorce: provision in decree that one party obtain or maintain life insurance for benefit of other party or child, 59 A.L.R.3d 9.

Insurable interest of brother or sister in life of sibling, 60 A.L.R.3d 98.

Estoppel of, or waiver by, issuer of life insurance policy to assert defense of lack of insurable interest, 86 A.L.R.4th 828.

Insurable interest of foster child or stepchild in life of foster or step parent, or vice versa, 35 A.L.R.5th 781.


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