What must exist between the policyowner and the additional insured in a nonfamily rider?

In the context of a nonfamily rider, it is essential for a financial interest to exist between the policyowner and the additional insured. This means that the policyowner must demonstrate that they would suffer a financial loss due to the death or injury of the additional insured. This requirement is rooted in the principle of insurable interest, which is a fundamental concept in insurance that ensures that the policyowner has a legitimate stake in the life or health of the insured.

The existence of financial interest serves to prevent moral hazard and ensures that insurance remains a protective mechanism rather than a speculative financial investment. It underscores the rationale that one should only insure individuals with whom they have a direct financial relationship—such as business partners, co-owners, or key employees—rather than family members in a nonfamily context, where such financial ties may not be present.

In situations where the insured individuals do not share a familial bond, having a financial interest established is crucial for the validity and ethical grounding of the insurance policy. This ensures that the policy is taken out with a legitimate purpose related to financial responsibility rather than arbitrary or non-serious motives.