Ch. 2 The Insurance contract

Utmost good faith

The principle of utmost good faith imposes a higher degree of honesty on parties to an insurance contract. Both parties must know all material facts and relevant information; neither may attempt to conceal facts or deceive the other party.

Indemnity

A person should not profit from his loss or collet more than the actual cash value of a loss.

Endorsement

An endorsement is a form attached to the policy that changes the policy to fit special circumstances. Such modification of the contract is not permitted unless the insurance company approves it in writing. The endorsement may be attached at the beginning of the policy or added during the policy's term.

Conditions

An insurance policy's conditions set forth the insurer's and the insured's rights and duties, including the procedure for resolving a disagreement involving a loss between the insured and the company.

Unilateral Contract

Insurance contracts are unilateral in that one party (the insurer) makes any kind of enforceable promise. Insurers promise to pay benefits when a certain event occurs, such as death or disability.

Personal Contract

Insurance policies are considered to be personal because they protect the individual who owns the property. It is made between the insured and the insurer and cannot be transferred to another person.

Parts of a contract

Must involve competent parties . This means that the parties to the agreement must have the legal capacity to act. The contract must have a legal purpose. It must contain one party's offer and the other party's acceptance of the offer. And each party must five consideration, something of value. The insured's consideration is his premium payment, and the insurer's consideration the promise of indemnity. Intent is not requirement for a valid contract.

Indemnification

The process by which an insured is restored to a pre-loss condition. Indemnity indicates that compensation in the form of payment, repair or replacement has been given to an insured to make him whole again and to relieve him his loss.

Declaration statement

A policy's declaration page contains information from statements the insured made on the application and information about the risk insured. It identifies the persons or entities that are the insured's and includes other pertinent date, such as the effective date of coverage, deductible, premium amounts, coinsurance percentage, location of property, and the insurer's limits of liability. The declaration page personalizes the insurance policy.

Consideration

The consideration is the exchange of value. In insurance, the insured's consideration is paying the premium. The insurance company's consideration is the promise to pay in case of a covered loss.

The Declarations page

The declarations page of an insurance policy contains statements made by the insured on the application, information about the risk, and the other pertinent data, such as insured's name, effective date of coverage, deductible, premium amounts, coinsurance percentage, and location of the property.

Parts of an insurance policy

Declaration, insuring agreement, conditions and exclusions.

Insuring Agreement

The section of an insurance contract containing the obligation of the insurer to pay covered claims, subject to specified condition and exclusions. It contains the insurance company's promise to pay for loss, it should result from the perils insured against.