Legal Purpose requires what conditions?

• A. It must be legal and not against public policy, with insurable interest and consent
• B. It must be approved by the insurer
• C. It must be filed with the regulator
• D. It must be in writing

Answer: (A)

A valid insurance contract must have a lawful objective and be backed by two key safeguards: insurable interest and consent. The legal purpose means the deal is intended to manage a real risk in a lawful way, not to enable illegal activity or something against public policy. Insurable interest ensures the applicant would suffer a genuine loss if the insured event occurs, so the policy isn’t a gamble or wagering device. Consent ensures the insured agrees to be covered, preventing policies from being taken out about someone without their knowledge or approval. Together, these elements keep the contract enforceable and align it with legitimate risk management. While insurer approval, regulatory filing, and the contract being in writing matter in other ways, they don’t define legal purpose the way the combination of legality plus insurable interest and consent does.