What is an example of contingency insurance?

Contingency insurance is designed to protect individuals or businesses against specific risks or uncertainties that may cause a financial loss. Among the options provided, life insurance serves as an example of contingency insurance because it pays out a specified sum upon the death of the insured individual. This form of insurance is contingent upon the occurrence of an uncertain event, namely, the insured's death.

Life insurance is established to provide financial support to beneficiaries in the event of the policyholder's demise, thereby fulfilling its role as coverage against the contingency of death. This protection helps ensure that dependents are financially secure following the loss of a primary income earner.

In contrast, homeowners insurance, health insurance, and auto insurance are categorized differently. While they do provide various forms of coverage for risks associated with property damage, medical costs, or vehicle-related incidents, these insurances are more about covering ongoing risks rather than being directly linked to a specific uncertain event like death, which is the defining characteristic of contingency insurance.