Which type of clause describes the following statement: "We have issued the policy in consideration of the representations in your applications and payment of the first-term premium"?

• A. Consideration clause
• B. Entire contract clause
• C. Incontestability clause
• D. Representations clause

Answer: (A)

Consideration in contract law is the value exchanged between parties to form an agreement. In life insurance, the insured provides value by paying the premium and by making representations in the application. In return, the insurer issues the policy and promises to pay benefits. The statement ties the policy issuance directly to the representations and the first-term premium, which identifies the exchange of value—the essence of a consideration clause. The other clauses address different purposes: the entire contract clause confirms what documents make up the contract; the incontestability clause limits the insurer’s ability to contest after a period; the representations clause deals with the truth and status of statements on the application, not the exchange of value itself. So this is the consideration clause.