State RegulationsNY specificDifficulty 1/5
Under N.Y. Ins. Law §3205, why do close blood and marriage relatives automatically have an insurable interest in one another's lives?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under N.Y. Ins. Law §3205(a)(1), close blood or marriage relatives are presumed to have a substantial interest in the continued life of one another arising from love and affection, so no separate proof of economic loss is required for them to insure each other. Everyone else must demonstrate a lawful and substantial economic interest in the continued life of the person insured.
Why the other options are wrong
- A) No presumption of financial dependence is needed or applied — the presumption rests on the relationship itself.
- B) Shared household expenses are irrelevant; the statute presumes the emotional interest of close family.
- D) The presumption is the opposite — family insurable interest does not require showing an economic motive.
Memory hook
Family = love and affection; strangers = dollars and sense.