In which type of contracts is the use of basis of contract clauses legally permitted?

The correct answer highlights that the use of basis of contract clauses is not legally permitted in either consumer or non-consumer insurance policies. Basis of contract clauses essentially aim to make representations or statements made by insurers part of the contract of insurance, which can lead to significant consequences for the policyholder if those representations are incorrect or misleading.

In consumer insurance contracts, there is a strong emphasis on protecting policyholders due to the imbalance in knowledge and bargaining power between consumers and insurers. The law seeks to prevent insurers from imposing unfair terms on consumers, hence such clauses are not allowed. Similarly, in non-consumer (commercial) policies, while there may be more flexibility in contract terms, the need for clarity and fairness in the contractual relationship is equally critical. Certain regulations also restrict the use of these clauses to ensure fair treatment across different types of policyholders.

The answer captures the legal environment in insurance law, which prioritizes consumer rights and fair practices in contracting, indicating that neither group of policies can include these clauses without legal ramifications. This illustrates a commitment to transparency and the protection of policyholders from potentially deceptive practices.