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

For an insurance contract to be valid and enforceable, all parties involved must possess legal competence. This means that they must have the mental ability to understand the nature and consequences of the contract they are entering into. Legal competence generally requires that individuals are of a certain age (usually the age of majority, which is 18 in most places) and are not under any legal disqualifications, such as being declared mentally incompetent or being intoxicated at the time of signing.

Being financially literate, having insurance experience, or being medically cleared are not requirements for legal competence in the context of an insurance contract. While financial literacy may help individuals make informed decisions, it does not affect their legal ability to enter into a contract. Similarly, experience in insurance can be beneficial when assessing policies, but it is not necessary for the legal validity of the contract. Medical clearance might be applicable in specific insurance scenarios, such as health insurance, but it does not pertain to the general requirement of legal competence across all types of insurance contracts.