The requirement that an insured demonstrate an insurable interest has two policy justifications: to prevent parties from engaging in pure speculative gambling with respect to others' assets or liabilities and to reduce __________.

Question

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The requirement for an insurable interest aims to reduce moral hazard, which occurs when one party engages in riskier behavior because they are protected from the consequences, typically by insurance.

The Requirement That an Insured Demonstrate an Insurable Interest Has