Which of the following statements is true regarding insurance contracts?

The correct answer is that insurance contracts require clear terms to avoid ambiguities in claims. This is crucial because the nature of insurance involves various obligations and expectations that both parties (the insurer and the insured) must adhere to. Clear and unambiguous terms help to define the scope of coverage, the rights and responsibilities of each party, and the procedures for submitting and handling claims. If the terms are vague or poorly defined, it can lead to disputes when a claim is made, as the parties may interpret the agreement differently. Courts typically prefer to uphold insurance contracts as written, but if terms are ambiguous, they may be construed in favor of the insured, who is typically considered the weaker party in the agreement.

Regarding the other statements, insurance contracts are not exclusively regulated by public law; they also fall under contract law and various regulations specific to the insurance industry. Modifications to an insurance contract cannot be made unilaterally; typically, both parties must agree to any changes to ensure fairness and mutual consent. Lastly, subrogation rights are frequently included in insurance contracts, allowing insurers to pursue recovery from third parties responsible for a loss after compensating the insured. This mechanism is an essential part of managing risks and costs within the insurance framework.