General Insurance PrinciplesQuestion 187 of 716
An insurance contract is described as aleatory because:
a.The dollar amounts exchanged are unequal and depend on chance
b.It must be in writing and signed by both parties to be enforceable
c.Both parties exchange dollar amounts of equal and certain value
d.Only the insurer makes a legally enforceable promise
Explanation
Aleatory means that the amounts exchanged are unequal and depend on chance: an insured may pay one premium and the insurer must pay the full face amount, or the insured may pay for decades and never collect. Equal exchange is the opposite of aleatory.
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)