Insurance Contract

Insuring Agreements

Heart of the policy, state in general what is to be covered or, in other words, the losses for which the insured will be indemnified. Also describes the type of property covered and the perils against which it is covered.

Competent Parties

A contract is not valid unless it is made between two parties who are considered competent under the law.

Definitiions

Clarifies the meanings of certain terms used in the policy.

Exclusions

Describe losses for which the insured is not covered. If an excluded loss occurs, the insured will not be idemnified.

Unilateral

Means one sided. An insurance company is one sided because only the insurance company us legally bound to perform its part of the agreement. The insured is not legally obligated to pay premiums.

Conditions

State the ground rules for the policy, decribes responsibilities and obligations of both insurance company and insured.

Declarations

Which are almost always on the first page of the policy: Name of the insured, the address, the amount of coverage provided. a description of property, and cost of policy

Consideration

Also a requirement for a a valid contract, it is a thing of value exchanged for the performance promised in the contract. (example: insured gives is the premium payment. Insurer gives the promise to pay for certain losses suffered by the insured.)

Offer of Acceptance or Agreement

Also a requirement of a valid contract , this means that the contract involves two parties. This is a promise that requires an act or another promise in exchange.

Aleatory

An insurance contract is____ this which means it is contingent in an uncertain event (a loss) that provides for unequal transfer of value between the parties

Adhesion

An insurance contract is____ we mean that one party has greater power over the other party in drafting the contract. The provisions of the contract are prepared by one party ___ The insurer. The other party, the insured, does not take part in the preparation of the contract. A problem is that in insurance contracts ambiguity can be an issue if the insurer doesn't make the terms and agreements of the policy clear. Courts usually resolve in favor of the insured.

Principle of Indemnity

States that when a loss occurs , an individual should be restored to the approximate financial condition he/she was at before the loss, no more and no less.

Contract

A legal agreement between two competent parties that promise a certain performance in exchange for a certain consideration.(example: Insurance company agrees to pay for the insureds losses in exchange for a certain premium)

Personal Contract

An insurance contract does not insure property; it insures the person who owns the property.

Contract of Utmost Good Faith

Another characteristic if an insurance contract. The insurance company relies on the truthfulness and integrity of the applicant when issuing the policy.

Legal Purpose

Another requirement for a valid contract is that it be formed for a legal purpose

D.I.C.E

Parts of Contracts: Declarations, Insuring Agreements, Conditions, Exclusions