Under the law governing insurable events, which type of event may properly be insured against?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under California Insurance Code Section 250, any contingent or unknown event — whether past or future — that may cause financial harm to a person having an insurable interest, or create a liability against that person, may be insured against, subject to the Code's other requirements. The event must be uncertain, not guaranteed, so that a genuine risk exists: a certainty is a known cost rather than an insurable contingency. This broad rule permits coverage of everything from life and health risks to property and liability exposures, as long as the insured has an insurable interest and the loss would be fortuitous rather than deliberately caused.
Why the other options are wrong
- B) An event the insured intentionally causes is not a proper subject of insurance, because the loss must be fortuitous and accidental; allowing intentional loss would encourage the insured to profit from the policy.
- C) Insurable events must be uncertain as to occurrence or timing, because insurance exists to cover contingency; an event certain to occur is a predictable cost that cannot be the subject of an insurable risk.
- D) Insurable events are not limited to physical damage to real property; life, health, disability, liability, and personal property losses are all insurable under the same broad rule when an insurable interest exists.
Memory hook
Contingent and unknown events, plus an insurable interest — that is the recipe for an insurable event.