General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An applicant who has been judicially declared legally incompetent applies for and is issued a health policy. Under contract law, the policy is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A contract requires parties who have legal capacity to enter into it. A person who has been adjudicated incompetent by a court lacks capacity entirely, so contracts entered into by that person are void — they have no legal effect. This differs from a minor's contract, which is voidable at the minor's option. The payment of premium cannot cure the absence of capacity, and health policies are no exception to the general capacity requirement.
Why the other options are wrong
- B) Voidability is the rule for minors' contracts; a judicially declared incompetent person's contract is void, not merely voidable.
- C) Payment of consideration does not create capacity; a void contract has no legal effect regardless of premium.
- D) All contracts, including insurance, require parties with legal capacity; there is no health-policy exception.
Memory hook
Adjudicated incompetence = no contract, period. Not voidable — void.