Formation Of Insurance Contract Requisites of validity required by general rules of law of contracts: Agreement (offer+acceptance) Two parties (capable of contracting) Valuable consideration Purpose (legal/public policy) Fairly made Full knowledge of all materials and facts
The Parties Of Insurance Contract Two parties/three Insurer insured/assured
One person contracting with himselfcannot conclude insurance contract Authority of agent doesn’t An agent of The agent extend to any insurance represents both transactioncompany cannot of the parties in where his insures his own the same personal interest property. contract. is opposed to the principal’s.
The offer to conclude insurancecontract should designate the second party by: Name Profession Domicile
In some insurance policies the name of the insured party maybe left blank.Policies of In this case Heinsurance it is becomes a deemed to party of maybe be issued contract byissued “for on behalf of “ratifyingthe benefit “some the policyof whom it person not issued for concerns” designated” his interest”
The Insurer Joint stock companiesCooperativeassociation Mutual of for assurance assurance
The Insured He should have Valuable interestNatural/legal protected from loss person or injury by reason of any peril it maybe exposed to.
The right of being assured: Any Falls within citizen the class of Guaranteedprotecting inherent and by law and himself inalienable constitution. against rights loss.
The person Capable • must be Having the capacity of •competent to exercise.conclude the contract Insurnace Capacity of • adminstrationcontract being A minor can conclude • an act of insurance contractadminstration related to his property.
Consent of the parties of insurance contract General rules of law of contracts: Contractual Valid offer acceptance
Customary methods of making insurance contracts: The person desiring to be insured makes the offer Issuing and Sign a written delivering the application drawn policy+payment by the insurer of first premium Delivering the Forward it to the application to the general officers agent of insurer
The requirments of a valid offer:It should express a definite commitment inits material terms creating a power ofacceptance to the offeree The offer must be complete by determing the subject insured and the perils against the premium.The offer should be communicated to theofferee hence an offer is made when theofferee receives it.
The insured normally proceeds the offer The insured is If the insurer in his compelled toacceptance introduce contract with the new terms or insurer according conditions. to insurer terms. There is no In some cases the negotiation since insurer becomes an insurance contract is offeror (when a a contract of proposal form is used) adhesion
Contains questions which the proposed assured is required to answer It is considered as an offer from It could not bethe insured, and The considered as anthe insurer is the proposal offer of insuranceofferee who may forwarded from accept or reject form insurer to insured it It doesn’t lead to the conclusion of contract in case of insured acceptance
The proposal form contains the following informations:Description Description of Description of Previous historyof the the risk subject circumstances of the proposedproposed to proposed affecting the risk assured:assured: insurance: insured:•His name In case of: The insured answers •Experience of the•His address questions directed to proposed assured:•His profession •Personal accident him through which the the insured has to(the insured “the insured has insurer tries to find state if he haswill not be held to state his age, whether there are suffered loss by theresponsible of weight and height” special circumstances peril subject tomisrepresentat making the risk greater proposed insurance.ion if he has 2 •Property than usual. •Relations with otherprofessions insurance •In personal accident insurers:and stated “he has to give full He should be informed He should state if heone only) description of the about the past & has ever made a as the rate of property subject to present state of health. similar proposal topremium will the proposed •In liability insurance other insurers, andnot be insurance” He should be informed whether this proposalaffected. about state of the was declined or insured premises,... accepted.
Propsal form for life insurance “questions asked by the insurer relates to”: .Name, residen Sum to A proposal Whether thece, profession, be form has policy is foroccupation, da insured ever been the benefit te & place of declined or of insured birth, hight& Type of accepted at estate’s or of weight of policy an extra named proposed required premium beneficiaries Name & Whether a adress of Details of proposal previous Details of any the usual form ha ever illness & of circumstances medical been made to medical affecting the attendant the insurer advice & suitability of concerned or treatment the life insured to other in last 2 for insurance insurers. years purpose
The proposer has to sign at the end ofthe proposal that the answers he has given are true, and they are to be considered “the basis of the contract”. The proposer maybe asked to declare that he’s in good health, and authorizes the insurer to seek information from any doctor he has attended. Any answer given by the doctor is to be considered “the basis of the contract”. If it is revealed that the statements made by the proposer are false or fraudulently stated, after the insurer acceptance, he would be responsible for a breach of contract.
The effect of the proposal form After being filled & signed by the proposed insuredThe insurer will be bound after the Is forwarded toacceptance to issue the insurer or toa policy complying his agent with the terms of the form Acceptance of the insurer to The proposal form this offer leads represents an offer, to the showing terms the conclusion of insured is willing to insurance contract contract