Types of insurance consumers will encounter most often are auto insurance, homeowners insurance, umbrella insurance and life insurance. Characteristics of Insurance: One can easily differentiate these characters of insurance as below: 1. There will be a short quiz following the lesson. Another unique characteristic of insurance contracts is unilateral insurance. Characteristics of Fire Insurance. CHARACTERISTICS OF A CONTRACT OF INSURANCE 1. However, if the applicant had no symptoms of any kind that would be recognizable to an average person and no doctor's opinion to the contrary, he or she would simply be stating an opinion and not making a misrepresentation. There are two basic types of conditions: conditions precedent and conditions subsequent. When one person assumes the identity of another for the purpose of committing a fraud, that person is guilty of the offense of impersonation (also known as false pretenses). However, if an applicant misrepresents some piece of information with no intent for gain (such as, for example, failing to disclose a medical treatment that the applicant is personally embarrassed to discuss), then no fraud has occurred. You don't get to dictate the terms of the policy, and you must pay corresponding premiums for any changes you do request after it is in force. The policy must specify A … Characteristics of an Insurance Contract. Learning Objectives Only one of the parties to the contract is legally bound to do anything. Advertised rates on this site are provided by the third party advertiser and not by us. The insurance contract is a contract of adhesion. As with all contracts, insurance policies outline the duties and obligations to which each party must adhere. In a unilateral contract, an insured person pays the insurance policy premium. Insurance contracts are usually personal agreements between the insurance company and the insured individual, and are not transferable to another person without the insurer's consent. Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. The insurance industry is one made up of legal agreements between insurance companies and their customers. Insurance is a type of financial product that protects a party such as an individual or business against unforeseeable losses or damages. If you never have a loss, you are the only party to the contract that ever does anything. The Characteristics of Insurance Contracts An insurance contract is a legal agreement between the insurance company and the policyholder. Let’s review these distinctions. Yearly Price Of Protection Method: A method used in actuarial analysis, which is often used in the insurance industry. Some of these characteristics are unique to insurance contracts. While you must always pay your premiums, the insurer only has to act if you suffer a loss. Insurance is a form of contract or agreement under which one party agrees in return for a consideration to pay an agreed amount of money to another party to make good for a loss, damage, or injury to something of value in which the insured has a pecuniary interest as a result of some uncertain events. Meaning of Insurance: If one goes by the word meaning insurance is a contract between two parties whereby the insurer agrees to indemnify the insured upon the happening of a stipulated contingency, in consideration of the payment of an agreed sum, whether periodical or fixed (the premium). For instance, if an insurance applicant intentionally lies in order to obtain coverage or make a false claim, it could very well be grounds for the charge of fraud. As an illustration, if the owner of a car sells the vehicle and no provision is made for the buyer to continue the existing car insurance (which, in actuality, would simply be the writing of the new policy), then coverage will cease with the transfer of title to the new owner. The article explains the contract of agency in a descriptive manner, along with how the contract of agency is created and its characteristics. Key Takeaways . Aleatory (偶然性)¶ Insurance contracts are aleatory. whereby one party called the 'insurer,' for a consideration, undertakes to pay. So, if the contingency occurs, payment is made, otherwise, no amount is given to the policy-holder. His failure causes loss to the first party. The most common of these features are listed here: If one party to a contract might receive considerably more in value than he or she gives up under the terms of the agreement, the contract is said to be aleatory. Insurance contracts are of this type, because the insurer writes the contract and the insured either 'adheres' to it or is denied coverage. The company has a right to decide with whom it will and will not do business. Most of the time, contracts between two parties represent an agreement for certain services in exchange for an amount of money that corresponds to the services rendered, which is generally fair to both parties. Characteristics of a Simple Contract. Insurance is a contract between the insurer and insured whereby the insurer undertakes to pay the insured a fixed amount, in exchange for a fixed sum (premium), on the happening of a certain event (like at a certain age or on death), or compensate the actual loss when it takes place, due to the risk insured. The assured can, in the event of loss, recover the actual amount of loss from the insurer. While all contracts rely on the good faith of their parties to some degree, insurance contracts are contracts of "utmost" good faith, because there are no concrete goods or services involved. The insurance contract is an aleatory contract. He recently published his first novel, "The Seventh Day of Christmas." With many contracts, the two parties can negotiate the terms of the contract before they sign it. For example, if you never file a claim, the insurer receives all your premiums and profits from the agreement. In a contract of adhesion, one party draws up the contract in its entirety and presents it to the other party on a 'take it or leave it' basis; the receiving party does not have the option of negotiating, revising, or deleting any part or provision of the document. For instance, an individual that would likely be turned down for insurance coverage due to questionable health might request a friend to stand in for him (or her) in order to complete a physical examination. 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