A sales representative offers a contract under which a consumer pays monthly installments and the company promises to pay a fixed sum to the consumer on a scheduled date in five years. Under California Insurance Code Section 22, this arrangement is:

Why A is correct

Section 22 requires a contract under which one party indemnifies another against loss, damage, or liability arising from a contingent or unknown event. A savings-style arrangement that pays a fixed, scheduled sum on a certain date involves no contingency and no loss to be indemnified — the payment is simply a return of accumulated funds. Because there is no uncertain event and no loss exposure, the arrangement is not insurance. Distinguishing insurance from pure savings plans is a core application of the statutory definition.

Why the other options are wrong

• B) An exchange of money for a future payment describes a savings or investment arrangement, not insurance; insurance requires an indemnity tied to a contingent loss.
• C) The company assumes no risk here; a fixed, scheduled payout is fully predictable and carries no underwriting risk to transfer.
• D) The direction of payment is irrelevant; the defining feature is the absence of a contingent or unknown loss event.

Memory hook

A scheduled check in five years is a savings plan, not insurance. Insurance needs a 'maybe' in the middle.