Life insurance is considered a conditional contract because the insurer's obligation to pay:
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
A conditional contract is one in which the performance of a promise depends on the occurrence of stated conditions. In life insurance, the insurer's duty to pay the death benefit arises only if the policy is in force, which requires the premiums to be paid when due, and only upon the occurrence of the insured event, generally the death of the insured. If these conditions are not met, the insurer's obligation does not attach. The relevant insured event is the death of the insured person, not the agent, and the claim-filing requirements are governed by the policy and law rather than by a one-week condition.
Why the other options are wrong
- A) Payment is conditioned on the policy being in force. A policy that lapses for nonpayment of premium removes the insurer's obligation to pay the death benefit. The controlling legal standard set out above demonstrates precisely why this option is incorrect.
- B) The insured event is the death of the person whose life is insured, not the death of the agent. The agent's status has no bearing on the insurer's obligation. This choice misstates what the statute actually requires, so it must be eliminated from consideration.
- C) No such one-week claim-filing condition exists. Claim submission is governed by the policy's provisions and applicable law, not by a fixed one-week deadline. This option reflects a different rule and does not match the law that governs the transaction.
Memory hook
Conditional = pay premiums first, then the insurer pays on the event. Conditions come before cash.