General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An insured wants to transfer her individual disability policy to a friend as a gift. Which statement correctly describes the insurance contract's nature in this situation?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Insurance contracts are personal contracts: they are tied to the individual insured's risk characteristics — age, health, occupation, and lifestyle — which the insurer evaluated in issuing the policy. Because underwriting is personal, the insured cannot transfer the policy to someone else without the insurer's consent; to do so would place a different risk on the insurer than it accepted. Transferring or assigning a policy without consent is therefore generally impermissible in personal health and disability coverage.
Why the other options are wrong
- B) The policy is not freely transferable like ordinary property; the insurer underwrote a specific person's risk.
- C) Signing the policy over does not transfer it; the insurer's consent is required to substitute a different insured.
- D) Paying premiums by a third party does not cure the problem — the coverage would still rest on a risk the insurer never accepted.
Memory hook
Personal contract = written for this person's odds. You cannot gift it to a stranger's risk profile.