General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An insurance contract arranged to further an illegal purpose would most likely be:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Every valid contract requires four elements: agreement, consideration, competent parties, and legal purpose. If the contract's purpose is illegal — such as insuring a wager on another's health or furthering unlawful conduct — the contract is void or unenforceable because courts will not enforce agreements that violate the law or public policy. Paying a premium cannot cure the defect; legality is judged at formation and is essential to enforceability.
Why the other options are wrong
- B) A higher premium cannot make an illegal arrangement enforceable; the defect lies in the legality of the purpose itself.
- C) Payment of the premium does not cure an illegal purpose; legal purpose is a required element independent of payment.
- D) There is no mechanism by which an illegal private contract is converted into a government-administered policy.
Memory hook
Legal purpose is element four. An illegal deal is dead on arrival, no matter the premium.