Consideration

What Does Consideration Mean?

Consideration is the exchange of money for the guarantee of an action performed or another benefit provided. In the context of insurance, the insurance company provides the consideration of coverage for losses as long as premiums are paid. If a person wishes to maintain the option of receiving this consideration, they can purchase a policy and pay the premiums.

Insuranceopedia Explains Consideration

In insurance, as in many areas of business, one party can receive benefits from another only by exchanging something of value. In the insurance context, this exchange is called paying premiums. By doing so, an individual becomes eligible to receive fair consideration from the insurance company.

For example, a person who pays auto insurance premiums to an insurer would receive consideration in the event of a covered loss to their vehicle. This consideration would entail the insurance company covering the losses.