Nevada Property and Casualty P&C Exam Practice 2025 – Complete Prep Resource

To legally purchase insurance on a property, a policyholder must establish insurable interest. This principle requires that the policyholder has a legitimate reason to insure the property, which typically means they would suffer a financial loss if the property were damaged or destroyed. Insurable interest is a foundational concept in insurance law that ensures policies are purchased with a genuine stake in the insured property, thereby preventing moral hazard and speculative insurance practices.

Without insurable interest, the insurance contract could be considered void because the policyholder has no financial risk connected to the property. This requirement helps create a responsible and fair insurance marketplace, where individuals take care of their properties and are genuinely concerned about loss or damage.

While legal title, claim history, and valuation assessments may play important roles in the insurance process or underwriting, they are not prerequisites for the purchase of insurance. Legal title refers to the ownership rights to the property, claim history relates to previous insurance claims, and valuation assessments are conducted to determine the property's value. However, none of these factors replace the necessity of establishing insurable interest as a critical requirement for obtaining insurance coverage.