What is essential for a life office to accept a life assurance application?

An insurable interest is critical for a life office to accept a life assurance application because it confirms that the applicant has a legitimate and vested interest in the continued life of the insured person. This principle ensures that the relationship between the policyholder and the insured is financially justifiable. Insurable interest is vital to prevent moral hazard, where someone could otherwise benefit financially from the death of another without any genuine connection or financial loss related to that individual's passing.

In life assurance, proving insurable interest indicates that the applicant would suffer a financial loss if the insured were to die. This concept helps maintain the integrity of the insurance system and validates the purpose of purchasing life insurance, which is to provide financial support to beneficiaries in the case of death, rather than to serve as a speculative investment.