Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The consideration clause of a life insurance policy states that the contract is issued in exchange for:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The consideration clause identifies what the policyowner gives in exchange for the insurer's promise: the payment of premiums, together with the statements and representations contained in the application. Consideration is one of the four elements required to form a valid contract, and in an insurance policy it consists of the premium plus the representations made by the applicant. The insured's submission to medical exams, the beneficiary's acceptance of proceeds, and any agent guarantee are not part of the consideration that supports the contract.
Why the other options are wrong
- B) Medical examinations are an underwriting tool used to evaluate the risk. They are not part of the consideration that the policyowner exchanges for the insurer’s promise.
- C) The beneficiary does not provide consideration for the policy. The beneficiary is a third-party recipient of the proceeds who has not given anything in exchange for the contract.
- D) An agent cannot guarantee cash value or act as a party to the contract. Consideration consists of the premium and the statements in the application, not an agent’s promise.
Memory hook
Consideration = what you bring to the deal. Premium plus application answers buy the insurer's promise.