Florida Insurance Licensing Practice Exam

An insurance contract which may contain a "gray area" or an ambiguity that is generally resolved in favor of the insured because insurance is a contract of:

1. Adhesion

2. Indemnity

3. Personal nature

4. Legal purpose

The correct answer is: Adhesion

An insurance contract is a legally binding agreement between the insured and the insurer. Adhesion refers to the fact that the insurer holds most of the bargaining power in such a contract. This means that any ambiguities or gray areas in the contract will typically be interpreted in favor of the insured since they had little to no input in creating the contract terms. This is to ensure that the insured is protected and the insurer cannot take advantage of any unclear language in the contract. Option B, indemnity, refers to the principle of restoring the insured to the same financial position they were in before the loss occurred. This is not related to the concept of a "gray area" or ambiguity in the contract. Option C, personal nature, is also not related to the concept of a "gray area" in the contract. A personal insurance policy refers to coverage for an individual rather than a business or