In which situation does insurable interest need to be established?

Insurable interest must be established at the time of loss because it confirms that the policyholder stands to suffer a financial loss due to the adverse event affecting the insured crop. This principle is foundational in insurance contracts, as it prevents moral hazard and ensures that insurance is only available to those who have a legitimate stake in the wellbeing of the insured entity.

When insurable interest is established, it verifies that the policyholder has a valid reason to ensure the crop, meaning they would incur a financial loss if the crop were damaged or destroyed. This requirement is about ensuring that claims are made by those who have something to lose, thus reinforcing the integrity of the insurance mechanism.

In other contexts, like when calculating premiums, establishing the insurable interest is not as crucial because the premiums are based on risk assessments and historical loss data rather than the policyholder's direct stake in the crop. Similarly, after the yield is assessed or during the claim-filing process, the focus shifts to evaluating the extent of the loss rather than the initial justification for the insurance coverage itself. Therefore, establishing insurable interest is specifically critical at the moment of loss to validate the claim and ensure that compensation is being provided to those who rightfully deserve it.