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Life insurance is generally classified as a valued contract rather than a pure contract of indemnity. Which statement best explains why?

ALife insurance reimburses funeral and burial expenses up to actual cost
Life insurance pays a fixed face amount stated in the policy, not the measurable economic loss caused by the death
CLife insurance proceeds are limited to the insured's annual income at the time of death
DLife insurance pays only the cash value, not the face amount, on death

Why this is the answer

Property and casualty insurance operate on the principle of indemnity — they make the insured whole for the measurable economic loss, no more. Life insurance is different. Because a human life has no objectively quantifiable replacement cost, the policy pays a predetermined face amount agreed at issue, regardless of the insured's earning power or economic contribution at the time of death. This is why life insurance is called a 'valued contract.' The insurable-interest requirement at inception (Fla. Stat. §627.404) is what prevents this valued-contract feature from becoming pure wagering. Per the Florida Agent's Health & Life Exam Content Outline §II.D and §IV.

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