Which of the following is required for a valid contract?

• A. Exchange of consideration only
• B. Acceptance of a valid offer only
• C. Both exchange of consideration and acceptance of a valid offer
• D. Neither

Answer: (C)

A contract is enforceable only when there are three things: a clear offer, an unequivocal acceptance, and something of value exchanged (consideration). In life insurance, the insured’s application typically serves as an offer to buy coverage, while the insurer’s agreement to issue a policy serves as acceptance. The consideration arises from both sides: the insured’s premium payments and the insurer’s promise to pay benefits if a covered event occurs. Without acceptance, there’s no binding agreement; without consideration, there’s no enforceable obligation. Therefore, both exchange of consideration and acceptance of a valid offer are required for a valid contract.