What must occur for the principle of insurable interest to hold?

The principle of insurable interest is fundamental in insurance law, and it requires that the insured stands to suffer a distinct potential loss or harm as a result of the insurance event occurring. This means that there must be a genuine interest in the preservation of the life, property, or health that is being insured.

When the insured has an insurable interest, it validates the insurance contract because it ensures that the insured has a legitimate stake in the continuation of what is insured. This principle helps to prevent moral hazard and insurance fraud, as it obliges the insured to have a reasonable expectation of loss, thus promoting responsible and actionable behavior. In cases where the insured does not have an insurable interest, the contract may be deemed void, as it undermines the purpose of insurance to protect against actual financial loss.

The other choices do not accurately represent the requirements of insurable interest. Profit from losses by the insurer, payment of minimum premiums, and predictability of insurance events are not essential components of establishing insurable interest themselves. Instead, they pertain to other aspects of the insurance process, such as underwriting practices and risk assessment.