Pennsylvania Life and Health Insurance Exam Practice Question
The applicant must face the possibility of losing something of value in the event of the insured’s death. This principle is known as
Correct Answer: C
Rationale: The principle of insurable interest requires that the applicant has a legitimate stake in the insured’s life, meaning they could suffer a financial loss upon the insured's death. This ensures that insurance is used to protect against loss rather than as a gambling mechanism.
Option A, adhesion, refers to contracts where one party has significantly more power, not related to the applicant's stake. Option B, consideration, involves the exchange of value in a contract, but does not address the need for a financial interest. Option D, aleatory, pertains to contracts where outcomes depend on uncertain events, which does not specifically involve the applicant's financial stake in the insured's life.
Unlock All Questions
Subscribe to Premium for full access to all practice questions, detailed rationales, and performance tracking.
Subscribe Now