Insurable interestis a fundamental principle of life insurance recognized under Pennsylvania law. It requires that the applicant or policyowner have a legitimate financial or emotional interest in the continued life of the insured and face the possibility of afinancial loss or loss of value upon the insured’s death.

Pennsylvania insurance standards require insurable interest to existat the time of policy application, ensuring that life insurance is used for protection rather than speculation. Examples include spouses, close family members, business partners, or creditors, all of whom would suffer a measurable loss if the insured were to die.

The other answer choices are incorrect. A viatical settlement involves the sale of an existing policy, indemnification applies primarily to property and casualty insurance, and adverse selection refers to higher-risk individuals seeking coverage. Therefore, the principle described isinsurable interest, making optionCthe correct and verified answer.