Insurable interest in life insurance is necessary when there is a financial stake or dependency on the life of the insured person. This means that if the insured person passes away, the policyholder would suffer a financial loss. For example, if a person has a mortgage or other debts, they may take out a life insurance policy to ensure that their family or estate can cover those debts in the event of their death. In this case, the insurable interest lies in the financial obligations that would be left behind. Similarly, if a business partner has a significant stake in a company, they may take out life insurance to protect the company's assets and ensure a smooth transition in the event of their death. Insurable interest is crucial because it ensures that the policyholder has a legitimate reason for obtaining the insurance, and it prevents the misuse of life insurance policies for fraudulent purposes.