Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In a life insurance policy, the "consideration" that makes the contract enforceable consists of:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Consideration is one of the four elements of a valid contract. In life insurance, the insured's consideration is the premium, including the first premium paid with the application, together with the statements and representations made in the application; the insurer's consideration is the promise to pay the death benefit under the policy's terms. Without this exchange of value, the contract would be unenforceable. The application is attached to and made part of the policy, which is why misstatements in it can affect the contract.
Why the other options are wrong
- B) The death benefit is the insurer's promise, which is the insurer's consideration, not the insured's consideration.
- C) Agent commissions are internal compensation, not contractual consideration between the insured and the insurer.
- D) Cash value builds over time from premiums; it is not the consideration that forms the contract.
Memory hook
Consideration = premium plus the truth you wrote on the application. Both sides must give something.