Something of value that each party gives to the other.

Prepare for the Primerica Insurance Licensing Exam efficiently. Study with quizzes and multiple choice questions, each with detailed explanations. Get exam-ready!

Consideration is the value exchanged between the parties in a contract. It’s what each side gives up or promises in return for something from the other, making the agreement enforceable. In an insurance contract, the insured pays a premium and the insurer commits to paying covered claims; both sides provide consideration, which is why the contract holds legal force. Without consideration, a contract generally isn’t binding, and gifts or past actions don’t count as valid consideration. The other elements describe parts of forming a contract—an agreement, lawful purpose, or who is competent to contract—but they don’t capture the idea of the value exchanged between the parties.