Insurance contracts are considered personal contracts primarily because:
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
An insurance contract is personal because it is based on the particular risk presented by a specific person or property, and the insurer relies on the characteristics of that risk when pricing coverage. For this reason, a policy generally cannot be assigned or transferred to another person without the insurer's consent, because the new party might present a different, riskier exposure. This characteristic protects the insurer's underwriting assumptions and is one of the defining features of an insurance contract as opposed to a freely transferable commercial instrument.
Why the other options are wrong
- A) Witnessing is not a legal requirement for insurance contracts. The personal nature refers to the risk insured, not to the ceremony of signing. Signatures are a practical formality, not a legal definition; the personal character of the contract concerns the risk itself.
- B) Businesses frequently purchase insurance, including key-person and commercial policies. Personal contracts are not limited to individual buyers. Corporations and partnerships routinely buy coverage, so personal contracts are not confined to individuals.
- C) Many policies are issued without a medical examination, such as guaranteed issue or simplified issue life insurance. Exams are not required for every contract. Simplified issue and guaranteed issue policies are written without a medical exam, so exams are not universal.
Memory hook
Personal contract = your risk, your price. You cannot hand the risk to a stranger without a handshake.