Which term describes policies that are in direct opposition to the principle of insurable interest?

Stranger-oriented life insurance refers to a type of life insurance arrangement where the insured individual is not a person that the policyholder has an insurable interest in, meaning the policyholder does not have a legitimate stake in the life of the insured. This concept directly opposes the principle of insurable interest, which requires that the policyholder could suffer a financial loss or hardship should the insured die.

The principle of insurable interest is fundamental to the functioning of life insurance, as it helps prevent moral hazard and ensures that the purchase of insurance serves a protective purpose rather than a speculative one. In stranger-oriented life insurance scenarios, the arrangement can lead to misuse and ethical concerns, as it allows individuals to profit from the death of someone with whom they have no significant connection.

Other related terms, such as the law of large numbers, good faith, and indemnity, each pertain to different aspects of insurance mechanisms and ethical practices but do not specifically illustrate policies that defy the insurable interest requirement. Therefore, stranger-oriented life insurance is the term that aligns directly with the violation of this core insurance principle.