Two Definitions Of An Insurance Contract
An insurance contract is building to both the insurer and the insured. The term contract may then be defined as a binding promise or an agreement that is an force able by law.
Insurance Contract as a Binding Promise
Under this premise, contract means either a promise or a set of promises, the performance of which is recognized as an obligation under the law and which it gives a remedy in case of a breach of a particular promise or promises. For a contract to be considered valid, the person or group of persons must have a legal duty to perform a promise that was made. Typically, an insurance policy reads ‘'x insurance company agrees to pay...'' The phrase ‘'agrees to pay ‘' are promissory for the insurer that creates a legal duty of performance, when certain other requirements specified in the insurance contract are met. Annuity contracts are also illustrated by this definition.
A promise can be made by one person or by both persons that are parties to a contract. Mutual promises are termed bilateral contracts while a promise made by only one person is called a unilateral contract. The person making a promise is called a promisor while the one to whom the promise was made is called a promisee. It may be noticed that person is often used in contracts. This is because in its legal sense, the word person does not only mean natural persons or human beings but also organizations such as corporations as well.
An insurance contract is a unilateral contract since the policy holder does not have an obligation to pay his policy. It is kept in force as long as he pays his premiums as they become due, but the insurer cannot sue him in court if he does not pay.
The insurer on the other hand is obliged to pay all the obligations stipulated in the contract when certain conditions are not such as the demise of the insured. If unsure - get info from a lawyer!
Insurance Contract Enforceable at Law
As an enforceable contract, an insurance policy is composed of several elements. There are; an offer, an acceptance, adequate legal considerations, legally competent parties, a form required by law, no rule of law the contract of no legal effect and both parties involved were not under undue influence or duress. That a contract is a ‘'meeting of the minds'' is not considered in court since it is impossible to ascertain the actual state of mind of the contracting parties.
State of mind is but determined by the acts and words of the parties concerned. Thus mutual assent is evidenced by an offer and its acceptance. An insurance agreement is usually stipulated in a policy but this is not important. If the actions of both parties and documents involved otherwise satisfy the legal requirements of a contract, an insurance policy may be held effective even if there was no policy. On the other hand, if the legal requirements have not been met, an insurer may not be held legally liable to pay its obligations, even though there was an insurance policy issued.
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