Life insurance guarantees cash benefits for all of the following except?

Life insurance is designed to provide financial protection through guaranteed cash benefits, but certain conditions must be met for the policy to be valid. Typically, a policyholder must have an insurable interest in the life of the insured, meaning they would suffer a financial loss or some form of hardship if that person were to pass away.

When considering the correct answer, the situation involving the mistress illustrates a scenario where the individual does not have a legally recognized insurable interest. In most jurisdictions, a relationship like that does not establish the necessary financial interest to justify the purchase of a life insurance policy. The individual on the life of a spouse or a family member, for example, has a clear insurable interest, as their death would cause financial or emotional hardship.

Conversely, individuals can typically secure policies on their own life, on a spouse’s life, or even on a borrower’s life by a finance company, provided they have a legitimate business interest. The finance company has a viable claim because the borrower’s death could impact their financial stability.

Thus, the inability to guarantee cash benefits for a life insurance policy on the life of a mistress stems from the absence of an insurable interest, which is a fundamental requirement in life insurance contracts.