California Insurance License Exam Practice Test Practice Question
A contract of indemnity is one in which
Correct Answer: A
Rationale: A contract of indemnity specifically aims to restore the indemnified party to their original financial position following a loss, making option A accurate.
Option B describes a liability assumption, which is more characteristic of a suretyship or guarantee, not an indemnity.
Option C refers to adherence to a contract, which applies generally to all contracts but does not capture the essence of indemnity.
Option D emphasizes honesty, which is a principle of contract law but does not define the specific purpose of an indemnity contract. Thus, A best represents the core function of indemnity.
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