Tennessee Life Producer Practice Exam

What information does the Consideration clause in a life insurance contract provide?

1. Insured's health history

2. Amount of Premium Payments and when they are due

3. Insurance coverage details

4. Policy exclusions

The correct answer is: Amount of Premium Payments and when they are due

The Consideration clause in a life insurance contract outlines the specifics of the premium payments, including the amount that must be paid and the schedule for when these payments are due. This is a critical component of the contract as it establishes the financial commitment of the policyholder to the insurer in exchange for coverage. By delineating the premium details, the Consideration clause reinforces the binding nature of the contract, indicating that both parties—the insurer and the insured—have fulfilled their obligations. The insured agrees to pay a certain amount, which is essential for the policy to remain in force, while the insurer agrees to provide the insurance coverage stipulated in the contract. In summary, the significance of the Consideration clause lies in its function to ensure that premium payments are clearly articulated, which is fundamental to the overall agreement between the insurer and insured.