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Insurance Contracts


An insurance contract is a document representing the agreement between an insurance company and the insured. Central to any insurance contract is the insuring agreement, which specifies the risks that are covered, the limits of the policy, and the term of the policy. Additionally, all insurance contracts specify:

  • conditions, which are requirements of the insured, such as paying the premium or reporting a loss;

  • limitations, which specify the limits of the policy, such as the maximum amount that the insurance company will pay;

  • exclusions, which specify what is not covered by the contract.

Obviously, the contents of an insurance contract depends on the type of policy, what the insurance applicant wants, and how much he is willing to pay. The details of insurance policies are covered in Standard Insurance Policies. This article covers what is required of valid insurance contracts, since only valid contracts are legally enforceable.

There are 4 requirements for any valid contract, including insurance contracts:

  1. offer and acceptance,

  2. consideration,

  3. competent parties, and

  4. legal purpose.

Insurance contracts have an additional requirement that they be in legal form. Insurance contracts are regulated by state law, so insurance contracts must comply with these requirements. The state may stipulate that only certain forms may be used for certain types of insurance or that the contract must have certain provisions. Additionally, contracts must be approved by the state insurance department before they can be used, to ensure that they comply with regulations.

If a contract lacks any of these essential elements, then it is a void contract that will not be enforced by any court. For instance, most contracts signed by a minor are void contracts because they are not legally competent. A voidable contract is one that can be nullified by a party if the other party breaches the contract, or because material information was omitted or false in the contract. The party with the right to void can also choose to enforce it, instead. For instance, insurance companies can often void a contract because the applicant provided false information on the application. Thus, if someone was in an auto accident, and that person previously filled out the insurance application stating that he had no speeding tickets, when, in fact, he had, then the insurance company can void the contract and not pay the claim. Although most contracts can be oral, most are written, especially insurance contracts, because of their complexity.

The document Insurance Contract Term - Principles of Insurance, B com | Principles of Insurance is a part of the B Com Course Principles of Insurance.
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FAQs on Insurance Contract Term - Principles of Insurance, B com - Principles of Insurance

1. What is an insurance contract term?
Ans. An insurance contract term refers to the specific period during which an insurance policy is in effect. It outlines the start and end dates of coverage, as well as any conditions or limitations that apply during that time.
2. Can the insurance contract term be extended or renewed?
Ans. Yes, in most cases, insurance contract terms can be extended or renewed. However, the terms of extension or renewal may vary depending on the insurance company and policy. It is important to review the terms and conditions of the policy to understand the options for extending or renewing coverage.
3. What happens if the insurance contract term expires without renewal?
Ans. If an insurance contract term expires without renewal, the policyholder may no longer have insurance coverage. This means that any claims or losses that occur after the expiration date may not be covered by the insurance company. It is crucial to renew the policy or seek alternative coverage before the expiration date to ensure continuous protection.
4. Can the insurance contract term be canceled before its expiration date?
Ans. Yes, an insurance contract term can be canceled before its expiration date. However, the terms and conditions for cancellation may vary depending on the insurance company and policy. Some policies may allow for cancellation with a refund of premium, while others may have cancellation fees or penalties. It is important to review the policy documentation to understand the cancellation terms.
5. What should I do if I want to change the insurance contract term?
Ans. If you want to change the insurance contract term, such as adjusting the start or end dates, it is best to contact your insurance company directly. They will be able to provide information on whether such changes are possible and any associated fees or requirements. It is important to make any desired changes before the policy's effective date to ensure accurate coverage.
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