State RegulationsFL specificDifficulty 2/5
Which element is essential to an insurance contract under Florida law?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under the Florida Insurance Code, the defining element of an insurance contract is the transfer of the risk of financial loss from the insured to the insurer in exchange for the premium as consideration. The insurer's promise may be to indemnify a loss or to pay a fixed benefit upon a contingency such as death, which is what separates insurance from investments and warranties.
Why the other options are wrong
- A) Insurance involves uncertainty and indemnity or benefit payments, not a guaranteed profit for the insured.
- B) Sharing in an insurer's investment gains is an investment feature, not the essential risk-transfer element of insurance.
- D) Ownership of the covered property or interest remains with the insured; the insurer needs no ownership to assume risk.
Memory hook
No risk transfer, no insurance contract.