What consideration is required by the life insurance company for effective coverage?

The concept of consideration in an insurance context often refers to something of value that is exchanged between the parties involved in the contract. In pure insurance contracts, consideration is typically the payment of premiums by the insured in exchange for the coverage provided by the insurer. However, in the context of life insurance, it is also crucial for the beneficiary to maintain a continuing insurable interest in the life of the insured.

The idea behind requiring the beneficiary to have a continuing insurable interest is that it ensures the relationship between the insured and the beneficiary is significant enough to warrant insurance. This principle mitigates moral hazard, which is a situation where the beneficiary may benefit from the death of the insured without a genuine interest. If the beneficiary does not have a legitimate stake in the well-being of the insured, the arrangement might not hold up as a legitimate insurance contract.

While the payment of premiums is indeed vital for coverage to take effect, the emphasis on the beneficiary's insurable interest highlights a fundamental requirement that maintains the integrity of the insurance concept, balancing the interests of parties involved. This principle reflects the ethical and legal obligation that underpins the establishment of life insurance policies.