Which statement about insurable interest is correct?

Insurable interest is a fundamental concept in insurance that requires the policyholder to have a legitimate interest in the subject matter of the insurance policy at the time of the loss. This means that the policyholder would suffer a financial loss or hardship if the insured event occurs. As such, insurable interest must exist not only when the policy is taken out but also at the moment a claim is made. This requirement helps prevent insurance from being used as a form of gambling, ensuring that it serves its true purpose of risk management.

The other statements do not accurately describe the nature of insurable interest. For instance, while insurable interest needs to be established when the policy is initiated, it specifically must exist at the time of the claim for it to be valid, thus ruling out any notion of having no time constraints. Additionally, while there may be some superficial similarities between insurance and wagering, the requirement of insurable interest keeps insurance distinctly different from betting since it prevents individuals from profiting from losses they have no genuine connection to. Limitations on policy premium amounts are dictated by underwriting practices, risk assessment, and other factors, but they are not directly tied to the concept of insurable interest.