The national guide covers insurable interest, applications and underwriting in general. Utah has a detailed insurable interest and consent statute (31A-21-104) and rules on how applications bind the insurer (31A-21-105). This guide covers them.

Insurable interest (31A-21-104)

Who has an insurable interest

• A person has an unlimited insurable interest in their own life and health.
• Close relatives, by blood or law, have an interest "engendered by love and affection."
• Others need a lawful and substantial interest in the insured's continued life. Examples:
  • a shareholder, member or partner in a legitimate buy-sell agreement
  • an employer, for directors, officers, managers and other employees, with each insured's written consent

Timing

• For life insurance, the interest must exist at the policy's effective date. It doesn't have to exist when proceeds are paid.
• Knowingly procuring an interest in proceeds without an insurable interest is prohibited. A trust set up only to create the appearance of an interest violates the law. This targets stranger-originated life insurance.

Consent

• The insured must be 18 or older, not under guardianship, and give written consent, such as by signing the application.
• Exceptions:
  • a parent, custodian or guardian may consent for a dependent child
  • a grandparent may consent for a grandchild
  • a creditor may insure a debtor without consent, at its own expense, in an amount reasonably related to the debt

Effect of a defect

• A policy isn't invalid for lack of insurable interest or consent.
• A court may redirect the proceeds to the person equitably entitled.

Applications and representations (31A-21-105)

• Oral statements by the insurer's representative don't bind the insurer unless they're in the policy or a signed written application.
• Only the applicant, or someone with the applicant's written consent, may alter the application. Administrative changes are the exception.
• A misrepresentation affects coverage only if the insurer relied on it and it was material or made with intent to deceive, or the misrepresented fact contributed to the loss.
• If a requested copy of the application isn't provided within 30 days, nothing in the application affects the insurer's obligations to the person who asked.

Other rules

• Conditional or binding receipts are forms that must be filed with the Commissioner (31A-22-422).
• Irrevocable beneficiaries can't be changed without their consent (31A-22-413).

Common exam traps

• Life insurable interest is needed at the effective date, not at death.
• Consent must be written, from an insured who is 18+. A grandparent may consent for a grandchild.
• Lack of interest or consent doesn't void the policy, but a court can redirect the proceeds.