§ 27-4-27. Insurable interest.
(a) Any individual of competent legal capacity may procure or effect an insurance contract
upon the individual's life or body for the benefit of any person. Any life insurance
company doing business within the state may issue policies of insurance predicated
upon the life or lives of any person or persons with the consent of the insured, payable
at maturity to any educational, religious, benevolent, or charitable corporation or
association that can legally take and receive testamentary legacies and that are exempt
from taxation under 26 U.S.C. § 501(c), irrespective of a financial interest on the part of the corporation in the life
of the person or persons insured. No person shall procure or cause to be procured
any insurance contract upon the life or body of another individual unless the benefits
under the contract are payable to the individual insured or the individual insured's
personal representatives, or to a person having, at the time when the contract was
made, an insurable interest in the individual insured.
(b) If the beneficiary, assignee, or other payee under any contract made in violation
of this section receives from the insurer any benefits under that contract accruing
upon the death, disablement, or injury of the individual insured, the individual insured
or the individual insured's executor or administrator may maintain an action to recover
the benefits from the person so receiving them.
(c) "Insurable interest� as to personal insurance means that every individual has an insurable
interest in the life, body, and health of himself or herself and of other persons
as follows:
(1) In the case of individuals related closely by blood or by law, a substantial interest
engendered by love and affection;
(2) In the case of other persons, a lawful and substantial economic interest in having
the life, health, or bodily safety of the individual insured continue, as distinguished
from an interest that would arise only by, or would be enhanced in value by the death,
disablement, or injury of the individual insured;
(3) In the case of employees of public and private corporations, with respect to whom
the corporate employer or an employer-sponsored trust is the beneficiary under the
insurance contract, a lawful and substantial economic interest exists in:
(i) Key employees; and
(ii) Employees other than those identified in subsection (c)(3)(i), and former employees
and retirees for the purpose of funding, in the aggregate, all or part of the corporation's
cost for pre-retirement and post-retirement benefits; provided, (A) That the amount
of insurance coverage on these employees will be limited to an amount commensurate
with employer-provided benefits to those employees; (B) That an insurance program
used to finance these employee benefits includes former employees, retirees, or a
broad class of employees selected by objective standards related to age, service,
sex, or category of employment; and (C) That the proceeds created by that insurance
program are used for the sole purpose of funding the corporation's pre-retirement
or post-retirement benefit programs; and
(4) An individual party to a contract or option for the purchase or sale of an interest
in a business, partnership, or firm or of shares of stock of a corporation or of an
interest in the shares, has an insurable interest in the life of each individual party
to the contract and for the purposes of the contract only, in addition to any insurable
interest that may exist as to the life of that individual.
(d) Insurance effectuated under a group life insurance policy pursuant to the program
described in subsection (c)(3)(ii) need not comply with the provisions of § 27-4-22 to the extent the provisions of that section would be inconsistent or would conflict
with the purposes expressed in subsection (c)(3)(ii).
(e) An insurer shall be entitled to rely upon all statements, declarations, and representations
made by an applicant for insurance relative to insurable interest of the applicant
in the insured, and no insurer shall incur legal liability except as set forth in
the policy by virtue of any untrue statements, declarations, or representations relied
upon in good faith by the insurer.