PSI Ohio Insurance Practice Exam

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Study for the Ohio Insurance Test. Prepare with flashcards and multiple choice questions, each question accompanied by hints and explanations. Excel in your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Why are insurance policies categorized as conditional contracts?

They are guaranteed to cover all losses.
Certain conditions must be met for enforceability.
They only cover damages caused by natural disasters.
They can be terminated at any time by the insurer.

The correct answer is: Certain conditions must be met for enforceability.

Insurance policies are categorized as conditional contracts because they require specific conditions to be met in order for them to be enforceable. This means that both the insurer and the insured have obligations that need to be fulfilled for the contract to be valid. For example, the insured must pay premiums on time, report losses in a certain manner, or take reasonable care to prevent potential damages. If these conditions are not satisfied, the insurer may refuse to pay a claim, underscoring the concept that the contract's enforceability hinges on these stipulated conditions. The other choices do not accurately represent the nature of insurance contracts. Policies do not guarantee coverage for all losses, as there are exclusions and limits in every contract. They also do not only cover damages from natural disasters; many policies cover a wide range of risks. Lastly, while insurers have the right to terminate policies under certain circumstances, they cannot do so arbitrarily or at any time.