Life & Health Insurance Practice Exam 2025 - Free Practice Questions and Study Guide

The principle that allows ambiguities in insurance contracts to be resolved in favor of the insured is based on the concept of reasonable expectations. This principle emphasizes that insurance policyholders should expect their coverage to align with their understanding of the policy's terms. When the language in an insurance contract is unclear or ambiguous, courts often interpret those ambiguities in a manner that favors the insured, supporting the idea that policyholders should be protected based on their reasonable understanding of the coverage provided. This fosters fairness in the insurance process, acknowledging that policyholders may not have the same level of expertise in interpreting complex legal language as the insurers do.

In contrast, voidability pertains to situations where a contract can be declared void under certain conditions, such as misrepresentation or failure to meet legal requirements, which does not directly address ambiguities. Utmost good faith is a principle requiring both parties to act honestly and disclose relevant information, but it does not specifically tackle how to resolve ambiguities. A contract of adhesion refers to the nature of insurance contracts, which are typically drafted by one party (the insurer) and presented to the other (the insured) on a take-it-or-leave-it basis; while this aspect can contribute to issues of ambiguity, it does not provide a direct resolution