Rhode Island Insurance Adjuster Exam 2026 - Free Practice Questions and Study Guide

Question: 1 / 400

What does the "insurable interest" requirement state?

The policyholder must cover all possible losses.

The policyholder must have a legitimate interest in the insured item.

The "insurable interest" requirement is a fundamental principle in insurance that asserts that a policyholder must have a legitimate interest in the insured item or property at the time the insurance policy is purchased. This means that the policyholder stands to suffer a financial loss if the insured item is damaged, lost, or destroyed. The concept helps prevent moral hazard and ensures that insurance is used as a means of risk management rather than as a speculative investment. Essentially, it protects both the insurer and the insured by ensuring that the policyholder is genuinely invested in the welfare of the insured item.

For example, a homeowner has an insurable interest in their home because they would incur a financial loss if it were to suffer damage. Similarly, a car owner has an insurable interest in their vehicle. This requirement supports the legitimacy and purpose of insurance, as it confirms that the insured party has an actual stake in the preservation of the property being insured.

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The policyholder must be of legal age to purchase insurance.

The policyholder must demonstrate risk management skills.

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