A. Any individual of competent legal capacity may procure or effect an insurance contract upon his own life or body for the benefit of any person. No person shall procure or cause to be procured any insurance contract upon the life or body of another individual unless the benefits under such contract are payable to the individual insured or his personal representatives, or to a person having, at the time such contract was made, an insurable interest in the individual insured.

B. If the beneficiary, assignee or other payee under any contract made in violation of this section receives from the insurer any benefits thereunder accruing upon the death, disablement or injury of the individual insured, the individual insured or personal representative may maintain an action to recover such benefits from the person so receiving them.

C. As used in this section, "insurable" interest as to such personal insurance means that every person has an insurable interest in the life, body and health of himself, if an individual, and in the life, body and health of other individuals as follows:

(1) in the case of individuals related closely by blood or by law, a substantial interest engendered by love and affection; and

(2) in the case of other persons, a lawful and substantial economic interest in having the life, health or bodily safety of the insured individual continue, as distinguished from an interest which would arise only, or would be enhanced in value, by the death, disablement or injury of the individual insured.

D. An individual party to a contract or option for purchase or sale of an interest in a business partnership or firm, or of shares of stock of a corporation or of an interest in such shares, has an insurable interest in the life, body and health of each individual party to such contract and for the purposes of such contract only, in addition to any insurable interest which may otherwise exist as to such individual.

E. An insurer shall be entitled to rely upon all statements, declarations and representations made by an applicant for insurance relative to the insurable interest of the applicant in the insured; and no insurer shall incur legal liability, except as set forth in the policy, by virtue of any untrue statements, declarations or representations so relied upon in good faith by the insurer.

History: Laws 1984, ch. 127, § 334.

Am. Jur. 2d, A.L.R. and C.J.S. references. — Insurable interest of brother or sister in life of sibling, 60 A.L.R.3d 98.