General Insurance PrinciplesQuestion 163 of 215
Under California law, insurance is best defined as a contract whereby one party undertakes to:
a.Guarantee a financial profit to another party when an event occurs
b.Indemnify another against loss, damage, or liability arising from a contingent or unknown event
c.Pay a fixed annuity for the life of the insured regardless of any loss
d.Pool savings of many persons and return the savings on demand
Explanation
California Insurance Code §22 defines insurance as a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event. Insurance is about indemnification for a contingent loss, not guaranteeing profit, paying annuities, or pooling savings.
Law Reference: Cal. Ins. Code §22Practice all 215 questions free — no signup required.
Related questions on this topic
- A small business owner asks her broker to insure her chance of profit on a new restaurant venture. The broker should explain that this exposure is not insurable because it is:
- A homeowner buys a comprehensive policy and immediately stops locking his front door because he reasons that any theft will be covered. This change in behavior is BEST described as:
- The principle that allows actuaries to predict losses with reasonable accuracy as the number of similar exposure units grows is:
- An auto insurer notices that drivers with three recent at-fault losses are far more likely to apply for a new policy than drivers with clean records. This pattern is BEST described as:
- Which of the following is NOT one of the four essential elements of an insurance contract?
- An insured pays a $900 annual premium and suffers a $300,000 fire loss in the first month of the policy. The fact that the value exchanged is unequal and depends on chance makes the insurance contract:
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California Property & Casualty Insurance License Exam · How we review