Registered Insurance Brokers of Ontario (RIBO) Practice Exam

The concept of insurable interest refers to the requirement that a party must stand to suffer a financial loss if the insured property is damaged or destroyed. In the context of a mortgaged building:

The current owner of the property has an insurable interest because they hold the title and benefit from the value of the property.

The mortgage lender also has an insurable interest as they have a financial stake in the property. If the property were to incur damage and lose value, the lender's loan would be at risk.

The insurance broker acts as an intermediary in the transaction, facilitating the insurance policy, but does not have a direct financial interest in the mortgaged building. Therefore, they do not have an insurable interest in the property in the context of who would be financially impacted by its loss.

A prospective purchaser, while interested in buying the property, does not hold an insurable interest until a formal agreement is in place, as they do not bear a financial loss unless they have already entered a binding contract or obligation regarding the property.

Thus, the correct answer indicates that a prospective purchaser does not possess an insurable interest in the mortgaged building unless they are further along in the purchasing process.