Canadian Accredited Insurance Broker (CAIB) One Practice Exam

Who among the following can act as a legal party in an insurance contract?

1. A minor

2. A corporation

3. A partnership

4. A non-profit organization

The correct answer is: A corporation

In the context of insurance contracts, a corporation can act as a legal party because it is a recognized legal entity that can enter into contracts in its own name. Corporations have the legal capacity to sue and be sued, hold property, and enter into agreements, including insurance contracts. This capacity stems from the fact that corporations, upon formation, are granted rights and responsibilities akin to those of individuals under the law. While minors and partnerships have specific legal limitations, a minor generally cannot enter into a contract binding on themselves, including an insurance contract, due to their lack of legal capacity. Partnerships can enter contracts, but each partner is typically jointly liable, and the arrangement may hinge on the unique agreements between the partners. Non-profit organizations can also enter into contracts, but they often function similarly to corporations regarding legal capacity, yet the comparison here emphasizes the straightforward recognition of corporate status in the realm of legal entities. Thus, the ability of a corporation to act as a legal party in an insurance contract reflects its established status and operational framework as a separate entity recognized by law.