On 10 August 2020 Lina concludes an agreement with the AMG Insurance Company in terms of which the company undertakes to compensate Lina for any damage that she might suffer if the house that she inherited from her father, should be damaged by fire. She undertakes to pay a monthly premium of R300 and the first premium will be due on 31 August 2020. On 20 August 2020, the house is completely burnt down.
Which ONE of the following statements is CORRECT?
1 As a valid contract of insurance came into existence on 10 August 2020, AMG is bound to compensate Lina for the damage.
2 A valid contract of insurance will only come into existence when the first premium is paid by Lina.
3 Although a valid contract of insurance was concluded on 10 August 2020, Lina will only be covered by the contract when the first premium has been paid.
4 As Lina inherited the house and did not pay for it herself, she does not have an insurable interest in the house and the contract is invalid.