IIQE Paper 3 Introduction to Life Insurance question: kept paying the premiums

Answer: B. she remains entitled to the policy benefit

Answer: she remains entitled to the policy benefit. Insurable interest is needed only when the contract begins, so a later divorce does not affect the policy and she may collect the benefit.Why not the others:• the policy became void on the divorce: Interest is tested at inception only; losing it later does not void the contract.• she can recover only the premiums she has paid: The policy stays fully in force, so the benefit itself is payable.• she must prove a financial loss from his death to be paid: Proof of loss is not required; the policy is a benefit policy and interest existed at the start.Watch out: Thinking insurable interest must still exist at the time of death, as it must at loss in marine insurance.Rule: Life insurance: insurable interest is needed only at inception and is irrelevant afterwards (divorce, repaid debts).Source: IA Long Term Insurance (Paper III) Study Notes, 2022 Edition (8th ed., June 2022; for exams from 24 Oct 2022), 1.2.1(h)(i), p. 1/4