Insurance is considered a personal contract because it:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Insurance is a personal contract because the insurer relies on the identity and characteristics of the particular insured, such as health, habits, occupation, and loss history, in deciding whether to accept the risk and at what premium. The contract attaches to the person or the relationship, not to the property. As a result, the policy generally cannot be transferred to another party without the insurer's consent, because the new party presents a different risk than the one originally underwritten. This personal nature is one of the distinguishing characteristics of insurance contracts and explains why assignments usually require insurer approval.
Why the other options are wrong
- B) Because the contract is personal, it is not freely assignable; transferring the insured's interest generally requires the insurer's consent.
- C) Property insurance protects the owner's financial interest in the property rather than insuring the property itself, so it remains personal.
- D) Business entities can own life and health insurance on key individuals; 'personal' refers to the individualized risk, not to natural-person status.
Memory hook
Personal contract = underwritten for YOU, not for whoever walks in holding the property.