Multiple Choice
An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense. Which of the following best completes the definition?
142
views
1. Introduction to Accounting
Fundamental Accounting Equation
Multiple Choice
In an insurance contract, the applicant's consideration is the:
A
promise to pay claims
B
issuance of the policy
C
underwriting of the risk
D
payment of the premium
Verified step by step guidance1
Understand the concept of 'consideration' in a contract: In financial accounting and legal terms, consideration refers to something of value exchanged between parties in a contract. It is a fundamental element that makes a contract enforceable.
Identify the parties involved in an insurance contract: Typically, the two parties are the insurer (insurance company) and the applicant (policyholder). Each party provides consideration to make the contract valid.
Determine the applicant's consideration: The applicant's consideration is the payment of the premium. This is the monetary value the applicant provides to the insurer in exchange for the promise of coverage and payment of claims in the event of a covered loss.
Clarify the insurer's consideration: The insurer's consideration is the promise to pay claims and provide coverage as outlined in the policy. This is the value the insurer provides in return for the premium paid by the applicant.
Conclude that the payment of the premium is the applicant's consideration in the insurance contract, as it represents the applicant's obligation to fulfill their part of the agreement.
Related Videos
Related Practice
