Alabama Property and Casualty Practice Exam

Which type of contract is characterized as a two-party contract?

1. Property

2. Casualty

3. Liability

4. Auto

The correct answer is: Property

A property contract is characterized as a two-party contract, involving an agreement between the insured and the insurer. In this contract, one party (the insurer) agrees to provide coverage for specified property risks in exchange for premiums paid by the other party (the insured). The primary intent is to protect the insured's tangible assets, such as homes, buildings, or personal property, from loss or damage due to specified perils. While the other options—casualty, liability, and auto—also involve contracts typically established between two parties, they are often considered subsets of broader categories or specific types of coverage that include aspects of property insurance. For instance, casualty insurance focuses on protection against accidents and their consequences, while liability insurance covers the insured against legal claims for injuries or damages to others. Auto insurance, meanwhile, specifically relates to vehicles but still falls under the umbrella of property and casualty insurance. In summary, the distinction for the property contract lies in its primary focus on covering specific property risks, thus classifying it as a two-party contract centered around property protection.