What must exist for there to be insurable interest?

For insurable interest to exist, it is essential that there is a subject-matter that is being insured, a legal relationship between the insured party and the subject-matter, and the presence of financial value tied to that relationship. The subject-matter refers to the property or life that is being insured, while the legal relationship establishes a recognized connection whereby the insured has a legitimate stake in the value or well-being of that subject-matter.

Financial value is critical because it underpins the principle of insurable interest; the insured must stand to suffer a financial loss should a peril occur that affects the subject-matter. This relationship safeguards against moral hazard and ensures that insurance is utilized for protection, rather than exploiting a situation for gain.

The other choices either substitute the essential elements with incorrect terms, such as 'ownership' or 'financial loss,' or they sequence the components in a way that misunderstands their relational importance. For instance, merely having ownership without a legal relationship does not establish an insurable stake, nor does having a potential financial loss without a recognized legal relationship suffice to constitute insurable interest.