State RegulationsFL specificDifficulty 1/5
Which statement best describes an insurance contract under Florida law?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under Chapter 627, Florida Statutes, an insurance contract is an agreement whereby the insurer promises to pay or indemnify the insured for specified losses in return for the payment of a premium. Its defining feature is the transfer of the risk of loss from the insured to the insurer; an insurable interest keeps the contract distinguishable from a wager. Practically, every policy a Florida agent delivers is such a risk-transfer contract, which is why the insured cannot profit beyond the loss.
Why the other options are wrong
- A) That describes a wager: an insurance contract requires an insurable interest and indemnifies actual loss, not speculative gain.
- C) A guaranteed investment return is not the defining feature of an insurance contract; the essence is indemnification for contingent loss.
- D) Two insurers sharing risk between themselves describes reinsurance, not the insured-to-insurer relationship of an insurance contract.
Memory hook
Insurance = premium in, indemnity for loss out.