California Life and Health Insurance Practice Exam

The term "age of majority" in insurance refers to the legal age at which an individual is considered an adult and, thus, has the capacity to enter into binding contracts, including insurance contracts. This age is crucial in the context of insurance because minors, typically defined as individuals under the age of majority, generally cannot enter into contracts without some form of parental consent or guardianship.

When individuals reach the age of majority, they are able to independently purchase insurance policies and are fully responsible for the terms and conditions of those contracts. This legal distinction ensures that adults can make their own financial decisions and enter agreements that can have significant implications, such as life and health insurance policies.

Understanding the age of majority is essential for both insurers and prospective policyholders, as it delineates the point at which a person can make these important financial decisions without needing anyone else's consent. This clarity is significant across various types of financial products, where legal capacity plays a foundational role in contractual agreements.