What is an Insurance Contract?
The contract of insurance is an agreement between an insurer and an insured that determines the rights and obligations of each insurer.
The insurer undertakes to provide a defined benefit if the risk that it was intended to cover appears. For example, you would like to cover the financial risk that would result from your death before a certain age by paying by the insurer to your spouse a certain amount of money. If you die before this age ( the contract or risk you wish to cover), the insurer will pay this amount (defined benefit) to your spouse, subject to the terms and conditions of the contract.
The policyholder undertakes to declare the risk he wishes to cover correctly and to pay the insurer a fixed premium.
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In order to declare the risk, the policyholder must declare all the factors and circumstances that he believes reasonably allow the insurer to assess the risk and thus determine the premium correctly. To do this, the insurer usually has questionnaires to be completed by the policyholder.
If the policyholder fails to declare certain elements at the time of the negotiation, a contractor has committed errors in his declarations, penalties are provided for by law:
Either the omission or the error is intentional and the contract is null. A zero contract is a contract that does not exist and no claim will be made by the insurer;
The omission or error is not intentional and the insurer may adjust the contract and review the premium based on the amount that should have been claimed if the insurer had knowledge of the item that was omitted. If, in the meantime, there has been a loss, the insurer may reduce the amount of its intervention proportionately. Example: You stated that your house was worth 300,000 dollars. But in fact it was worth 400,000. But you did not know it. You paid an insurance premium of 600 dollars per year. It is a premium of 800 dollars that you should have paid. You paid only 3/4 of the premium you would have paid. If a claim arises, you will only be reimbursed by the insurance up to 3/4 of the amount of the damage.
When all the parties agree on the proposed contract, it is established and signed by the insurer and the policyholder.
The insurance contract is composed of:
General terms and conditions: they include the conditions, rights and obligations common to all insured persons for the same insurance product (Home, RC Auto, Family)
Specific conditions: they include the specific elements that concern the person and the precise risk that is covered (tariffs, amounts of guarantee, deductibles, contact details, address of the risk, effectiveness of the contract and duration etc.).
It also takes account of the insurance proposal which has been completed by the policyholder to declare the risks he is confronted with.
Finally, if your situation is likely to evolve, consider adapting your insurance contract accordingly. If during your contract your situation or the risk you wish to insure evolves, you must declare it to your insurer. This change may constitute an increase in risk. In this case, as in the case of an omission or an inaccuracy, sanctions are provided for by law in certain types of insurance. These penalties can be of different types: contract adaptation, termination of the contract (this means that the contract is terminated from a certain date), reduction of the benefit (the insurer reduces the amount of the reimbursement), Etc.
Points to be Remember when you are going to sign Insurance Contract.
- Before you take out your insurance policy, you have certainly reviewed, with your insurer or broker, the risks for which you wish to be covered. Take the time to read the contract carefully before signing it. Do not hesitate to have it adapted by your insurer if data is wrong or if you want to adapt the covers originally planned.
- Read carefully your contract and the exceptions provided by your insurer.
- If you do not understand one of the provisions of the contract, do not hesitate to ask your broker or your insurer for an explanation.
- Never forget that the conditions (payment of premiums, implementation of certain security measures as part of a flight insurance, absence of fraud etc.) by your contract must be respected in order to benefit from the coverage.