Delaware Life Insurance Practice Exam

The correct choice is related to the concept of a personal contract in the context of life insurance. A personal contract is one that is specifically made between an insurance company and an individual, which inherently requires the concept of insurable interest. Insurable interest means that the individual seeking insurance must have a legitimate relationship with the person whose life or property is being insured, indicating that the individual would suffer a financial loss if the insured event were to occur.

In life insurance, this personal nature of the agreement is crucial, as it protects against moral hazard and ensures that the insured has a vested interest in the continuation of the life of the insured. Without insurable interest, the insurance contract may be considered invalid or unenforceable.

The other types of contracts mentioned, such as unilateral and conditional contracts, do not emphasize the personal relationship or interest aspect in the same way. Unilateral contracts primarily involve one party making a promise that is contingent upon the other party performing an action, while conditional contracts require certain conditions to be met before the contract becomes enforceable. Mutual contracts focus on the idea that both parties have obligations, but they do not specifically pertain to the personal aspect required in insurance agreements regarding insurable interest.