1. What is a Contract of Insurance?
A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.
2. Who are the parties to an insurance contract?
Sec.6. Every person, partnership, association, or corporation duly authorized to transact insurance business as elsewhere provided in this code, may be an insurer. Sec.7. Anyone except a public enemy may be insured.
Sec.8. Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor. Sec.9. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and, at the time of his assent, imposes further obligation on the assignee, making a new contract with him, the act of the mortgagor cannot affect the rights of said assignee. 3. What are the characteristics of an insurance contract? Explain each. Insurance business offers peace of mind for a price. The consumer, called the "insured,” contracts with the insurance company (the "insurer") for financial occurs (and if it is covered by the contract), the insurer must reimburse the insured. Insurance contracts have common contract elements and a few unique concepts. Offer, Acceptance, Consideration
Every insurance contract must have offer, acceptance, and consideration. Insurance companies offer insurance services for a fee; consumers accept those services by writing a check and sending it to the company. The services offered and the money paid forms the consideration of the contract. Like other contracts, parties must be competent to contract (which usually means that the parties have reached the age of majority and are not mentally impaired). Greater Protection against Fraud and Untruthful Behavior Insurance contracts impose a duty of "utmost good faith" on the parties involved. Parties to any contract must act in good faith (which typically means the parties will deal with each other fairly). Insurance contracts, which involve intricate factual details about when an insured is entitled to reimbursement and what information the insured must provide to the insurer, require a higher duty than simply good faith. Utmost good faith means that the parties must declare every material detail and deal fairly. Material information is any information that could have an impact on the party's decision to enter into or decline the contract. An insured cannot hide the fact that he or she has heart disease if applying for a health insurance contract; the insurer cannot hide facts relating to how an insured can recover for loss. Aleatory, Executory, Unilateral and Conditional
Insurance contracts are unique because the insured pays the insurer for protection against events that may or may not come to fruition. As such, insurance contracts are aleatory, executory, unilateral and conditional. An aleatory contract means that one party may end up receiving more value than what he or she paid for. The insurance company, for example, could reap profit from an insured if the insured never files a claim (and keeps paying the premiums). Executory contracts require a party to act if an event occurs. The insurance company does not pay on claims until some event happens to the insured (such as a...
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