Which of the following is not a basic element of an insurance contract?

Which of the following is not a basic element of an insurance contract?

• A. Legal purpose
• B. Competent individuals
• C. Acquisition cost
• D. Consideration

Answer: (C)

The basic elements of an insurance contract include a legal purpose, competent individuals, and consideration. These elements are essential for the validity and enforceability of the contract. Legal purpose ensures that the contract is established for a lawful reason and does not promote illegal activities. Competent individuals refer to the parties involved in the contract possessing the legal capacity to enter into the agreement. Consideration involves something of value exchanged between the parties, such as the premium paid by the insured in exchange for the coverage provided by the insurer. Acquisition cost, while relevant to the overall financial structure of an insurance business, does not constitute a fundamental element necessary for the creation of an insurance contract. It typically refers to the expenses associated with obtaining a policy, such as commissions and marketing costs, and is not a requirement for the contract's validity. Thus, it is correct to state that acquisition cost is not a basic element of an insurance contract.

The basic elements of an insurance contract include a legal purpose, competent individuals, and consideration. These elements are essential for the validity and enforceability of the contract.

Legal purpose ensures that the contract is established for a lawful reason and does not promote illegal activities. Competent individuals refer to the parties involved in the contract possessing the legal capacity to enter into the agreement. Consideration involves something of value exchanged between the parties, such as the premium paid by the insured in exchange for the coverage provided by the insurer.

Acquisition cost, while relevant to the overall financial structure of an insurance business, does not constitute a fundamental element necessary for the creation of an insurance contract. It typically refers to the expenses associated with obtaining a policy, such as commissions and marketing costs, and is not a requirement for the contract's validity. Thus, it is correct to state that acquisition cost is not a basic element of an insurance contract.