Insurance contract

From ArticleWorld

Insurance contract is the written contract or insurance policy between the insured and the insurer that specifically spells out every aspect of the insurance policy, listing the coverage provided, as well as the exclusions and limitations, conditions in case of loss, and other details that are relevant to the terms of the agreement.

The written contract

The contract of insurance is prepared between the insurer and the insured and is binding on both. The insurer is bound to make the premium payments and the insurer is bound to honor the contract and compensate the insured in case an incident takes place.

Thus, all insurance contracts have basically the same purpose and methods. They take on the risk of an event – like car accident, house damage and medical treatment - which may or may not occur and pay the cost of it, if it does. The event may be one that may never occur. Then again, it may be an event that will happen but the timing is uncertain - for instance, death as in life insurance, which unfortunately is still a certainty. Nevertheless, the time of death is not fixed and in that sense there is still a very real risk of the insured dying when their family is absolutely dependant on them.

The fine print

1. Insurance law normally makes the provision that should there be any ambiguity or uncertainty in the wordings of a policy, or ambiguity in meaning the matter would be resolved in favor of the policyholder and against the insurer.
2. The monies exchanged between the insurer and the insured are not necessarily equal because they depend upon some uncertain future events.
3. The laws state that though the contract is binding on the insurer (to pay a certain amount to the insured incase all accounts between them are clear), it is not binding on the insured i.e. the insured is not bound to pay the premiums but in doing so forfeits the right to be paid by the insurer.

Not covered

There is a certain financial cost to the occurrence, which the insured needs to calculate. Therefore, while medical expenses and lost earnings are recoverable under insurance, the pain and suffering, or the sadness of losing a loved one will not be recoverable under an insurance contract.