Under California Insurance Code Section 250, which events may be insured against?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 250 provides that any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against that person, may be insured against. The two pillars of the statute are contingency or uncertainty — as to the fact or the timing of the event — and a genuine insurable interest. This is what separates true insurance from gambling: the insured must stand to lose something of their own. A past event can be covered only if its occurrence is still unknown, such as undiscovered latent damage; a fully documented past loss is a certainty and cannot be insured against.
Why the other options are wrong
- B) Section 250 permits insuring events that are contingent or unknown, which can include certain past events whose occurrence is still uncertain; documented past losses are generally not insurable because they are certain.
- C) There is no one-year limitation in the statute; it speaks of contingency or uncertainty, not a fixed time horizon within which the event must occur.
- D) An insurable interest is expressly required — a person cannot insure against events affecting someone or something in which they have no financial stake.
Memory hook
Section 250: an unknown or contingent event plus an insurable interest equals insurance. Certainty, or no stake, equals no insurance.