The Formation of an Insurance Contract
The formation of the insurance contract is generally preceded by steps and exchanges between the person who wants to insure and the insurer or intermediaries. Also, is it important for the insured to know the exact time from which he is hired because?
- If the contract is made, the insured is committed, he owes his premiums and can only get out by respecting the rules of termination of the contract
- If the contract is not formed when the insured believes the reverse, he is not protected in the event of a claim.
Formalities of an Insurance Contract
These formalities are necessary while making an insurance contract, these are also called special features of insurance contracts.
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Common information of the parties
Information from the insurer
the insurer, before subscribing, needs information on the risk to know if it is insurable and to fix the tariff.
To do so, the applicant must complete a questionnaire called the insurance proposal. The proposal does not commit the insurer or the insured. The insured may at any time withdraw it until the insurer has accepted it.
If the insurance proposal does not commit the insured, however, the answers to the questions must be correct, because when the contract is formed, it will be on this basis that any misrepresentations that lead to permissions will be assessed.
If you contact an insurer for information such as rates and guarantees, you should inform the insurer beforehand to avoid any misunderstandings.
The insurer is required to provide an information sheet on the insured’s price and guarantees. In the case of a civil liability contract, this information sheet must explain the functioning of the guarantees over time.
The exchange of consents
like any consensual contract, the contract of insurance is formed by the agreement of the parties, even verbal. Nevertheless, in practice, contract formation is contractually subject to a formality such as the signing of the policy.
The insurer may be required to draw up an interim contract, either pending a more thorough investigation of the risk or pending the establishment of a final contract. It then issues a document called a cover note. It is terminated by the final contract. If the contract is not concluded, it ceases to be effective on the due date.
Effective date of the guarantees
In the absence of any indication to the contrary, the contract takes effect as from its formation. The contract can be formed but the effectiveness of the guarantees may be postponed either on an agreed date or at a formality: signing the policy, or often paying the first premium because the insurer wants to be sure Have been paid before securing.
Principles that are essential for the formation of a binding insurance contract
The insurance policy
The contract is the legal link between the parties. The insurance policy is the writing that is proof of the insurance contract.
The contract of insurance, in its current acceptance, consists of general conditions that describe the rights and obligations of the parties and the guarantees. These are conditions common to all the contracts of a company that covers the same risks. In addition, there are special conditions that include the data specific to an insured person. It may also include special agreements, or other schedules whose name varies, which relate to the risks covered.
The insurance certificate
In the case of certain compulsory insurances, in particular, automobile civil liability, and the insurer must issue an insurance certificate proving that the insured person complied with the insurance obligation.
The insurance contribution
The remuneration to be paid to the insurer in consideration for the risk assumed is called the premium or premium.
The notice of maturity
The notice of maturity or call for contributions is a form by which the insurer specifies the amount to be paid (net contribution and ancillary) and the date from which you must pay it (due date).
The elements of the assessment
The net contribution
A number of the company’s claims and operating expenses, including, where applicable, intermediaries’ fees (general agents and brokers).
Accessories (or fees):
An amount covering certain management fees, such as setting up due dates. If the insurance company makes an amendment to amend the contract, it may collect additional accessories.
If the contract is indexed, the notice of maturity probably includes the amount of the index. The chosen index is generally an index external to the insurance, but it remains linked to the risk: index of the cost of the building for the insurances of the house, price of the day of hospitalization for the health insurance. Indexation makes it possible to readjust automatically a number of the contributions and the guarantees in the same proportion. It is desirable, notably for the insurance of goods whose value increases over the years. Without indexation, soon the insured capital would no longer correspond to the value of the guaranteed assets due to the depreciation of the currency and the rise in prices. The benefit paid to the insured person would then be reduced.
Taxes are sums paid by insurers to the State Treasury. They vary according to the risks taken care of: 30% for the fire risk of individuals, 9% of water damage, etc. The tax on compulsory motor insurance (18%) is increased by certain contributions (to Social Security, to the Guarantee Fund). All taxes are calculated on the basis of the net contribution, including costs and accessories.
The evolution of the contribution
If the increase is linked to the index, the principle of this increase has been accepted by signing an indexed contract. To verify that the increase does not exceed the increase in the index, it is sufficient to carry out the following operation:
- Contribution from the previous year X new index from the previous year
If the increase is linked to the application of a penalty (car insurance), the increase results from the bonus-malus clause in the contract. It is not in itself a cause of termination.
If the increase is linked to a change in taxes, these may vary by legal or regulatory decision. This increase is binding on all and is not subject to termination.
If the increase is linked to the addition of new compulsory guarantees, the increase which sometimes accompanies the latter is self-evident (eg the natural disaster guarantee). Similarly, since the law of 9 September 1986, all property contracts automatically include the guarantee of material damage resulting from acts of terrorism and attacks.
If the increase is linked to a variation in the insurer’s tariffs, two assumptions are possible:
- The contract contains a “revision of contributions” or “adaptation of contributions” clause: this clause authorizes the insurance company to increase its rates. The insured has fifteen days or one month from the moment he is informed of the increase, to request the cancellation of the contract by registered letter. Some contracts specify the minimum rate of increase below which the insured does not benefit from this right of cancellation. In this case, the insurer will claim the portion of the contribution between the due date and the termination date calculated in accordance with the old tariff. However, it is possible that the insurance company will terminate the contract only at the following annual maturity. The insured is also not obliged, Accept an increase in costs or accessories. This may be refused under the same conditions;
- The contract does not contain a review clause: the insurer is not entitled to modify the contribution without the agreement of the insured. It is, therefore, permissible to refuse the increase and to ask to recalculate the contribution.
If the increase is linked to a recall of contributions, only mutual insurance companies with variable contributions have the right to send reminders of contributions to their members. The legal form of an insurance company is indicated in the heading of the documents given to the insured persons, under the name of the company, with the words “variable contributions” or “fixed contributions”. Reminders of contributions are decided by the board of directors of the company. They apply to a given fiscal year. All persons who contributed in that year must pay for the recall, even though they have since ceased to be members.
Payment of the fee
The insured is obliged to pay his contributions on the agreed dates and has ten days after the due date to do so.
If the contribution is not paid on time, the insurance company will send a registered letter of formal notice. Thirty days later, the guarantee will cease. This period shall be calculated from the day of mailing of the registered letter. The insurance company may sue the insured for payment of the contribution, even if it cancels the contract ten days after the expiry of the 30-day period, as permitted by law.
If payment of the contribution has been made more than thirty days after the letter of formal notice has been sent: the contract has not been terminated and the security then leaves the following day at 12 noon of the day on which the contribution was made Been settled; Either the insurer has terminated the contract and the guarantee ceases at the earliest on the 41st day after the letter of formal notice has been sent. In this case, the payment of the contribution, which remains due in full, will not bring the contract into force.
The insured is free to use the indemnity paid by the insurer as he sees fit unless otherwise provided for in the contract. This principle is validated by constant case-law on the subject. Contrary to what is believed, the insured has no obligation to use it to replace the property or to repair the damaged object of the claim. However, if the rule requires that the insured is the sole person to decide on the use to be made of the indemnity, the contract or law may provide otherwise. Thus, in the case of construction damage insurance, Article A.243-1 of the Insurance Code provides that the compensation must be allocated to the repair of the immovable. This exception is imperative in the event of a natural disaster. Article L.
Modification of the insurance contract
During the course of the contract, modifications may be proposed by the insured or the insurer who wishes to change the terms of the initial agreement or may result from new circumstances that affect the risk originally reported. In all cases, the modalities for modifying the insurance contract are regulated by law.
The insurer is the source of a proposed change
When the insurer proposes to review the provisions of the original contract, it must, in any case, obtain the agreement of the insured. This agreement is embodied in an addendum. However, the insured may refuse the proposed changes. The insurer must then maintain the initial warranty conditions. On the other hand, it retains the right to terminate the contract at the following annual maturity.
The insured person is the source of a change request
The request for modification must be made by registered letter.
The Insurance Code provides for special rules concerning the acceptance of the insurer. To the extent that his claim does not concern a life insurance contract, the insured person may consider it to be accepted if the insurer does not refuse it within ten days. In other words, the insurer’s silence means acceptance.
Changes related to changes in risk
When the risk described at the time of contract purchase changes over time, this can lead to an increase in risk. The Insurance Code obliges the insured to declare in the course of a contract the new circumstances which have the consequence of either aggravating the risks or creating new ones and thus render inaccurate or obsolete The answers given to the insurer in the risk declaration form at the conclusion of the contract.
The insured person must declare these new circumstances to the insurer within fifteen days from the moment when he became aware of them. Following this declaration, the insurer must say within 10 days whether it intends to terminate or maintain the guarantee with an increase in the contribution.
In the event of termination, this shall take place ten days after notification.
In the case of a proposal with an increase in the contribution, two cases arise:
- The insured does not act on the insurer’s proposal or expressly rejects the new amount within thirty days of the proposal, the insurer may terminate the contract at the end of that period;
- The insured accepts the new conditions, an endorsement or a new contract is established. These provisions do not deprive the insurer of alternatives. Thus, when the change in risk appears to be minor in view of the underwriting criteria used at the time of subscription, the insurer may register the new situation without increasing the contribution.
In the case of an insurance guaranteeing the repayment of a loan (insurance-borrower), the insurer cannot cancel the contract because of increased risk except under special conditions resulting from a change Of voluntary behavior of the insured (example, a practice of a new sports activity particularly risky).
Reduction of risk
even if the new situation does not constitute an increase in risk, the insured retains the option to declare it to his insurer. Where the insurer has taken into account certain circumstances mentioned in the contract for the purpose of calculating the contribution and the latter disappear, the amount of the contribution must be reduced.
A refusal by the insurer to reduce the amount of the contribution authorizes the insured to terminate the contract. The cancellation takes effect thirty days after the insured has given notice. It should be noted that these provisions are not applicable to life insurance and to health insurance when the insured person’s state of health is changed.