Tennessee Insurance Practice Exam

What feature of an insurance contract refers to uncertain events that could trigger a payout?

1. Coefficient of variance

2. Fortuity

3. Risk factor

4. Contingency

The correct answer is: Fortuity

The concept that best describes uncertain events that could trigger a payout in an insurance contract is known as fortuity. In the context of insurance, fortuity pertains to events that are unforeseen and accidental, forming the basis for insurance coverage. The contract is designed to provide a benefit upon the occurrence of such events, emphasizing the unpredictable nature of these circumstances. This term differentiates between random incidents and those that are certain or highly probable. For insurance to be valid, a fortuitous event must occur; for example, if someone has a home insurance policy, the fortuitous event could be a fire or theft that leads to a claim. Thus, fortuity captures the essence of insurance, which is to protect against losses from unpredictable and accidental situations.