Which insurance principle refers to something of value that each party gives to the other in an insurance contract?

• A. Principle of Utmost Good Faith
• B. Principle of Consideration
• C. Principle of Indemnity
• D. Principle of Subrogation

Answer: (B)

Verified step by step guidance

1. Understand the question: The problem is asking about the insurance principle that involves something of value exchanged between the parties in an insurance contract.
2. Review the key principles of insurance: Familiarize yourself with the definitions of the principles mentioned in the options (Utmost Good Faith, Consideration, Indemnity, and Subrogation).
3. Focus on the Principle of Consideration: This principle states that both parties in a contract must provide something of value. In insurance, the insured pays a premium, and the insurer provides coverage in return.
4. Eliminate incorrect options: The Principle of Utmost Good Faith refers to honesty and full disclosure, the Principle of Indemnity ensures compensation for losses, and the Principle of Subrogation allows the insurer to recover costs from third parties. These do not involve the exchange of value in the same way as Consideration.
5. Conclude that the correct principle is the Principle of Consideration, as it directly relates to the exchange of value between the insured and the insurer.