What happens to an insurance policy if insurable interest is absent at the time of application?

When insurable interest is absent at the time of application, the policy becomes non-enforceable. Insurable interest is a fundamental requirement in insurance contracts, ensuring that the policyholder has a legitimate interest in the insured subject's continued existence or safety. This requirement exists to prevent moral hazard and ensure that insurance is used as a safeguard against risk, rather than as a speculative investment.

If insurable interest is not present, the insurer has the right to declare that the contract is void because it lacks a legal basis for guaranteeing the risk. Essentially, without insurable interest, the contract cannot stand, as it does not reflect a valid insurance relationship between the insured and the policyholder.

The other options relate to actions that could happen if a contract were to exist, but none would apply in the absence of insurable interest. Therefore, the correct understanding is that without insurable interest, the policy cannot be enforced, rendering it void from the outset.