What is consideration on the part of the insurer?

• A. A promise to pay in the event of a loss
• B. A promise to renew the policy
• C. A obligation to provide coverage at no cost
• D. A claim settlement offer

Answer: (A)

Consideration in an insurance contract is something of value exchanged between the parties. For the insurer, that value is the promise to pay for covered losses if they occur. In return, the insured provides premium and truthful information. This promise to indemnify when a loss happens is what creates the insurer’s obligation. Other elements like merely promising to renew, providing coverage at no cost, or a settlement offer after a loss are not the insurer’s consideration in forming the contract.