Table of Content
Page Number| Subject|
3| Insurance Contract Definition|
4| Insurance Contract Benefits |
4| Basic Sections of Insurance Contract |
6| Elements of a Valid insurance Contract|
6| Characteristics of insurance contract|
10| Examples of insurance contract|
Uncertainty, risk and insecurity are incidental to any form of business. This makes insurance indispensable for a business organization. Insurance may be defined as a contract in writing under which one party agrees to indemnify the other party against a loss or damage suffered by it on account of an uncertain future. Thus, the aim of insurance is to compensate the owner against the losses arising from a variety of risks which he anticipates to his life, property and business. It is a means of pooling of risks, under which a group of people who are subject to an insurable risk contribute regularly to a fund. The fund so created is utilized to compensate those members of the group who actually suffer a loss due to some unexpected calamity. Thus the loss of a few is shared by all the members on an equitable basis. Insurance contract is a special type of contract. The reason we call an insurance contract a special type of contract is because there are certain characteristics that relate to an insurance contract that do not relate to most other types of contracts. In this document we will explain what is Insurance contract in details. Insurance Contract Definition
A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. The parties to an insurance contract are the policyholder and the insurance company. It is important to understand that the insurance company, in exchange for a premium, promises to defend or indemnify the policyholder to the extent set forth in the insurance policy. Insurance Contract Benefits
An insurance contract provides a lot of benefits. Some of these benefits are as follow: * Protection: it provides protection against risk of loss and a sense of security to the clients. * Diffusion of risks: as the burden of loss is spread over a large number of people. * Credit standing: as the clients can easily transfer some of his risks to an insurance company. Basic Sections of Insurance Contract
Each insurance contracts shall contain certain sections. The basic sections of insurance contracts are as follow: * Declarations: This section provides information about the property to be insured. Declarations are usually found on the first page of the contract. The name and address of the insured, the age of the insured, and a physical description of the property are examples of declarations.
* Definitions: This section of the contract is analogous to the glossary in your text. The definitions section clearly defines what key terms in the contract mean. For example, many contracts now use personal pronouns to refer to the insured and the insurer. An "occurrence" and an "accident" can be interpreted in different ways, so these terms are specifically defined in the contract. If an insured is unclear as to how to interpret a word or phrase, he or she may refer to this section.
* Insuring agreement: This section summarizes the promises of the insurer. The insuring agreement can take one of two forms: named-perils coverage or all-risk coverage. Named-perils, as the phrase implies, provides coverage for only those perils specifically named in the contract. All-risk coverage is broader, insuring all perils except those specifically excluded. All-risk coverage is typically more expensive than named-perils coverage because the scope of the coverage provided is broader. * Exclusions: This section complements the insuring...