If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?

When an applicant for a life insurance policy and the potential insured are different individuals, the underwriter's primary concern focuses on the existence of insurable interest. Insurable interest is a crucial principle in life insurance, which requires that the applicant have a legitimate interest in the continued life of the insured. This safeguard ensures that the person taking out the policy would suffer a financial loss or other detriment upon the death of the insured, thus preventing moral hazards where someone might take out a policy on another person without any genuine stake in their wellbeing.

In this context, the underwriter must ensure that the applicant can demonstrate this stake before proceeding with the underwriting process. Without insurable interest, the policy might be considered void or unethical, as it allows for potential exploitation. This fundamental aspect of life insurance protects both the insurance company and the parties involved by ensuring that the insurance system is not used for illegal or unethical purposes.

While the applicant's financial history, credit score, and the health status of the potential insured are important factors in assessing risk and determining premiums, they do not address the foundational requirement of insurable interest when the applicant and insured are different individuals. Therefore, confirming the existence of insurable interest remains the underwriter's main concern in such scenarios.