When an employer takes out life insurance on an employee and names itself (the employer) as the beneficiary, it there an insurable interest. Each case needs to be looked at on its on merits.
A 1998, Tyler Court of Appeals is good case to read. It is styled, Stillwagoner v. Travelers Insurance Company.
The decedent’s employer procured a policy upon the lives of its employees without their knowledge, and named itself the beneficiary. The case presents the question of whether the employer had an insurable interest in the life of the decedent, and who is entitled to raise the issue of lack of insurable interest. Decedents surviving spouse and children contend that Travelers should have paid the $200,000 death benefit to the decedent’s estate, because her employer, Advantage Medical Services, Inc., had no insurable interest in the decedent’s life. Travelers insists that the beneficiary’s lack of an insurable interest is an issue that can only be raised by the insurance company, and that, in any event, the proceeds were properly paid to the employer because the employer had an insurable interest in the life of its employee.