For insurable interest to exist in a parental loan situation, when must it be established?

Insurable interest must be established at the time of policy inception because this is when the insured party's financial stake in the subject matter of the insurance is evaluated. In the context of a parental loan situation, the parents must show that they have a legitimate interest in the life or well-being of the insured (typically their child) at the point the insurance policy is initiated. This is crucial because it ensures that the insurance policy is not created purely for speculative purposes but is based on a genuine financial relationship.

Establishing insurable interest at the time of policy inception aligns with the fundamental principles of insurance, which are designed to prevent moral hazard and promote responsible risk management. If insurable interest were only evaluated at the time of a claim or at another point in time after the policy has been initiated, it could lead to situations where individuals seek insurance coverage without any real financial reliance or relationship to the insured, undermining the purpose of insurance.