Question

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as: a) Implied warranty b) Utmost good faith c) Reasonable expectations d) A warranty

Answer 1

The principle of utmost good faith is important in the forming of an insurance contract.

Step-by-step explanation:

The correct answer is b) Utmost good faith. In the forming of an insurance contract, the principle of utmost good faith states that both the insurer and the insured must act honestly and in good faith. The insurer must be able to rely on the statements made by the insured in the insurance application, and the insured must be able to rely on the insurer to fulfill its obligation to pay valid claims.