NSVT Module 3 Practice Exam

Why is an insurance contract described as aleatory?

Only the insured makes an enforceable promise Performance depends on an uncertain event and the values exchanged may be unequal Both parties must exchange equal dollar values Either party may cancel without conditions

Correct Answer:

Performance depends on an uncertain event and the values exchanged may be unequal

Explanation:

An aleatory contract involves an uncertain event. The premium paid and the amount an insurer may ultimately pay are not necessarily equal.

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