In an insurance contract, consideration is the exchange of value between the parties, such as the premium payment. Which option correctly identifies consideration?

• A. Payment of premium
• B. Promise to provide indemnity
• C. Insured's truthful representations
• D. Policy issuance by the insurer

Answer: (A)

Consideration is the value exchanged between the parties in a contract. In an insurance contract, the insured provides value by paying the premium in exchange for the insurer’s promise to pay benefits for covered losses. The premium payment is the clearest example of the consideration given by the insured, which is why it best identifies the concept.

The other elements reflect aspects of the contract but are not the value being exchanged: the insurer’s promise to indemnify is the insurer’s consideration, not the insured’s; truthful representations are about information in underwriting, not the value exchanged; and policy issuance is a resulting action, not the consideration itself.