2006 Code of Virginia § 38.2-301 - Insurable interest required; life, accident and sickness insurance

38.2-301. Insurable interest required; life, accident and sicknessinsurance.

A. Any individual of lawful age may take out an insurance contract uponhimself for the benefit of any person. No person shall knowingly procure orcause to be procured any insurance contract upon another individual unlessthe benefits under the contract are payable to (i) the insured or hispersonal representative or (ii) a person having an insurable interest in theinsured at the time when the contract was made.

B. As used in this section and 38.2-302, "insurable interest" means:

1. In the case of individuals related closely by blood or by law, asubstantial interest engendered by love and affection;

2. In the case of other persons, a lawful and substantial economic interestin the life, health, and bodily safety of the insured. "Insurable interest"shall not include an interest which arises only or is enhanced by the death,disability or injury of the insured;

3. In the case of employees of corporations, with respect to whom thecorporate employer, a trust established by the corporate employer, or anemployee benefit trust is the beneficiary under an insurance contract, thelawful and substantial economic interest required in subdivision 2 of thissubsection shall be deemed to exist in (i) key employees and (ii) otheremployees who have been employed by the corporation for 12 consecutivemonths, provided that the amount of insurance coverage on such otheremployees shall be limited to an amount which is commensurate withemployer-provided benefits to non-key employees as a group;

4. In the case of a party to a contract or option for the purchase or sale,including a redemption, of an interest in a business proprietorship,partnership or firm or of shares of stock of a corporation or of an interestin such shares, the lawful and substantial economic interest required insubdivision 2 shall be deemed to exist in each individual party to suchcontract or option and for the purpose of such contract or option only, inaddition to any insurable interest that may otherwise exist as to the life ofsuch individual;

5. In the case of a trustee, other than the trustee of a domestic businesstrust or foreign business trust, as defined in 13.1-1201, the lawful andsubstantial economic interest required in subdivision 2 shall be deemed toexist in (i) the individual insured who established the trust, (ii) eachindividual in whose life the owner of the trust for federal income taxpurposes has an insurable interest, and (iii) each individual in whose life abeneficiary of the trust has an insurable interest; and

6. In the case of an organization described in 501 (c) of the InternalRevenue Code, the lawful and substantial economic interest required insubdivision 2 of this subsection shall be deemed to exist where (i) theinsured or proposed insured has either assigned all or part of his ownershiprights in a policy or contract to such an organization or has executed awritten consent to the issuance of a policy or contract to such organizationand (ii) such organization is named in the policy or contract as owner or asbeneficiary.

(1952, c. 317, 38.1-329; 1986, c. 562; 1988, c. 831; 1992, cc. 8, 50; 1993,c. 105; 2005, cc. 656, 698.)