July 4, 2020

Insurance Policies – Insurance Contracts | Features and Parts of Insurance Policy

We’ll start off here by looking at what insurance policies are. What are insurance policies? I am pretty sure some of you already know the answer to that. For those of you who don’t, you are in for a nice ride. Just in case you haven’t subscribed to our newsletter yet, make sure to do so on the sidebar or at the bottom of the page if you are using a high-end mobile device.

Insurance Policies

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Insurance Policies

Insurance is usually a contract that is generally a standard form. This contract is between the insurer and the insured. The insured is known as the policy holder. The policy holder is the one that determines the claims which the insurer is required to pay legally. This is done in exchange for an initial payment known as “Premium”. In insurance, the insurer promises to pay for any loss caused by accidents or perils covered in the policy language. An insurance policy is generally and usually an integrated contract.

Being an integrated contract means that it would include all the forms associated with the agreement between both the insurer and the insured. In some cases, supplementary writings which may include letters sent after the final agreement can alter the insurance policy. This, therefore, makes it a non-integrated contract. You should know that advertising materials and circulars are no part of a policy.

Insurance Contracts

Insurance contracts are specifically designed to meet specific needs and therefore, have many other features that are not found in other types of contracts. Because insurance policies are standard forms, they feature a specific language called boilerplate. This language is similar across a wide variety of different types of insurance policies.

General Features of Insurance Policies

What are the features insurance policies have in common? First, the insurance contract or agreement would be a contract where the insurer promises to pay the benefit of the insured or on their behalf or to any other party if any defined events occur. The policy is only valid for events defined in it. If the policy is subject to the “fortuity principle” then the event must be uncertain. The uncertainty can be when the event will occur or when it will occur. An insurance contract is generally considered a contract of adhesion. This is because the insurer draws up the contract and the insured has minimal or no ability to change it.

An insurance contract is aleatory in fact that the amount exchanged by the insurer and the insured are unequal and would depend on some certain future events. Insurance contracts are also unilateral which means that only the insurer makes legal enforceable promises in the contract. The last but not least, insurance contracts are governed by the principle of “utmost good faith”.

Parts of an Insurance Contract

There are certain parts that make up an insurance contract. These parts are ranged widely. These parts are declarations, definitions, insuring agreement, exclusion, conditions, policy form, endorsements, riders, and jackets. The declaration identifies who the insured is and the address. The declaration also identifies the insuring company. The definitions define the important terms that are used in the rest of the policy. There are meaning to all the other things which I cannot list here. For more information, you can visit Wikipedia at https://en.wikipedia.org/wiki/Insurance_policy.

Four Main Types of Insurance

Although there are different types of insurance, there are four main types. I would be listing these types shortly. The four main types of insurance are life insurance, health insurance, disability insurance, and auto insurance. I am guessing that from the name, you already know what you would be insured for. Auto insurance insures your cars, motorcycles and whatever has an engine.

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