Under California Insurance Code Section 22, a contract qualifies as insurance when one party agrees to indemnify another against loss arising from which type of event?

Why A is correct

Section 22 of the California Insurance Code defines insurance as a contract in which one party agrees to indemnify another against loss, damage, or liability arising from a contingent or unknown event. The word contingent means the occurrence of the event is uncertain; if the loss is certain to happen or has already happened, the arrangement is not insurance. This contingency requirement is what separates true insurance from savings accounts, investment products, or predetermined payment obligations, and it is the foundation on which all accident and health coverage is built.

Why the other options are wrong

• B) An event certain to occur on a fixed date involves no uncertainty about whether it will happen, so there is no risk to transfer and no premium can be based on probability; such an arrangement is not insurance under Section 22.
• C) A loss selected by the insured after it occurs would lack fortuity and would invite fraudulent claims; insurance must attach to a genuine contingency that exists before the loss, not one invented afterward.
• D) Insurance indemnifies against loss and never guarantees that the insured will earn a profit; guaranteeing investment results is the function of savings and investment vehicles, not insurance.

Memory hook

Contingent means maybe. If there is no maybe, there is no insurance.