Requirement to establish an insurance contract- Insurance law
Insurance is a contract of indemnity,one party(the insurer) offers to indemnify/compensate another (insured) incase something fatal happens to the insured as long as it's covered in the policy. The policy is the written contract that stipulates what the insurer (who is always an insurance company) will do incase an unforeseen event happens,it has the terms and conditions to be fulfilled by both parties.The insurance relationship is identical to other contracts however it has certain elements that make it
distinguished and these include;
Policy-
The insurer and the insured sign a contract called a policy and the contract has the details of what is intended to be insured.Most insurance policies are standard so it's up to the insured to accept or refuse the terms and conditions embedded there in,there's no room for negotiation.The policy serves as a legal document that binds both parties to the contract.
Provision of money's worth-
The insurance relationship also ought to make a provision of money's worth.The parties agree that in case a certain event occurs the insurer is obliged to reimburse the money or repair/purchase the object damaged. For instance if Mike insures his motorcycle from accidents the insurance company should be able to repair it or reimburse the money for the motorcycle.This is dependent on the terms agreed on in the policy.
Insurable interest-
One can only insure that in which one has an interest,you can't insure what doesn't belong to you and one can't claim indemnity where he has no interest.Ownership/legal interest is important in insurance,however there's an exception for third parties.A parent can insure his child's health but can't benefit from the medical insurance.It only becomes an exception because he insures on behalf of the child the benefits are only sustained to the insured.
Fortuity/uncertainty-
The occurrence of a fatal event insured against should be uncertain,the insured need not have foreseen it.The rationale is that the insurer promises to indemnify incase of an unforeseeable loss.
Control-
The insurer isn't supposed to have control over the risk,where the insurer has control then insurance loses meaning and it's deemed as a guaranty/warranty.
Premium-
Just like any other contract,there has to be payment of consideration in an insurance contract for the assumption of risk.The insured must pay an amount of money to the insurer to indemnify him in case he sustains loss in future.
The party that has intentions of insuring itself from a risk certain should make sure that it reads and understands the policy,avoid insuring risks that are foreseen or within his knowledge and must be certain that he has an interest in the object and above all endeavor to make his contract with the insurer legal.
Tags : Insurance Law