An insurance policy is a contract between the named insured and the insurance carrier. It's important to note that, for an insurance contract to be considered legally binding, it should comprise certain elements that are necessary for any contract to be legally binding. Here is a breakdown of all the important elements that make an insurance contract legally binding.
When purchasing an insurance policy, you're required to fill in an application. In your application, which is an offer, you agree to make specified premium payments for a given amount of insurance coverage. The acceptance or' meeting of minds' occurs when your insurance company formally agrees to issue you the policy.
For an insurance contract to be legally binding, the individual obtaining it must have attained the legally required age as well as be legally competent. The contract won't hold if the insured is intoxicated or insane or operating illegally.
This element of an insurance contract refers to the exchange of value that comes with a contract. For instance, with an insurance policy, the insured agrees to pay the insurance premiums, and in exchange, the insurer agrees to pay future claims.
Both parties should get into the contract willingly. During the contract signing, no coercion, fraud, intimidation, or misrepresentation should be involved.
Insurance contracts must adhere to the law. Therefore, a business that's involved in illegal activities can't be covered by an insurance policy.
The insured must be exposed to losses in case the insured peril occurs. For instance, you can't get a homeowners policy on a home you don't own and be compensated if it burns down.
For the insurance contract to hold, all parties involved in the insurance contract must be transparent in their actions without any misrepresentation, omission, or deception. Every party should have a clear understanding of the pertinent pacts.
This means all parties involved must fully disclose all the pertinent material facts. The must be no twisting of facts, omissions, or misrepresentation when the insured is filling out an insurance application form or when the insurer is providing the policy.
Under this principle, the insured can't receive more compensation than the losses they suffered due to a covered peril. Insurance is meant to help you regain your financial position before the covered peril strikes.
Subrogation means that the insurance can seek compensation from third parties liable for your loss. If you are in a car crash and the other driver is at fault, your insurer can seek to be reimbursed by the other driver's insurer.
Conditions are factors that determine if the insurer will pay the claim. The most important factor is that you're paying your premiums. But many others factors come into play when a claim is made.
These are promises outlined in the insurance contract. They define conditions leading to a claim and the insurer's obligations after a claim.
These are conditions under which the insurer won't pay a claim.
This list outlines the maximum compensation an insurer will pay for a given loss, as well as any conditions under which the insurer will be required to pay more or less.
This refers to how the loss occurred. The insurer has the right to know the circumstances under which the loss occurred to determine if the loss was due to a covered peril.
Insurance contracts can be complex. Hence, you should consult your insurance agent before you get a policy. At C.V. Mason Insurance, we will help you get the insurance that suits your needs. Contact our experienced agents today to get started on your insurance policy!
