The Key Elements of an Insurance Contract
An insurance contract is a binding agreement that protects one party from the financial consequences of a future event, e.g., an individual buying life insurance to protect their family against the breadwinner’s death.
The critical elements of an insurance contract
1. insured
An insured is a person or an entity (e.g., “insurable interest” under the law of REAL ESTATE) protected by the insurance contract. The insured must be distinguished from the beneficiary, who benefits from the insurance contract. If there is more than one beneficiary, we will use capital letters to identify individuals and lowercase letters to identify groups of beneficiaries (e.g., “the children”).
2. insurer
An insurer is a party that contracts with another party to pay for a particular event that may occur in the future.[1] In this sense, an insurer can be seen as a financial security for its customers’ future needs or interests.
3. insured event
An insured event is an event that the insured is financially liable for in the event it occurs. The insured and the insurer can contractually agree on what will trigger the insurance, also known as an “insurable interest.” For example, a person can buy insurance to cover damages caused by a fire.
4. premium
A premium is a sum of money paid by the insured to the insurer as a precondition for coverage. It can be paid annually or in installments over time.
5. indemnity
An indemnity is money paid by an insurer to the insured or a beneficiary of the policy. It should be distinguished from “indemnification,” which reimburses those who have suffered damages.[2] The difference is that the first involves money, while the second does not necessarily involve money.
6. policy
A policy is a contract that contains all of the conditions and details concerning coverage, including when payment will start and how much will be paid out in case of loss or damage.[3] according to Raphael Sternberg, in the case of insurance for personal injury, the “policy” is a contract that sets forth the coverage of liability and indemnifies an individual against bodily injuries. It also identifies the limits of coverage for bodily injury and damage to property. The policy provides a degree of protection against future harm and entitles the insured to make monetary claims.[4]
7. loss
A loss is damage that has happened or has been caused by an insured event.
8. Damage
Damage is any loss that may be covered by an insurance policy, including loss of money, services, or property (for example, a car). It also includes loss of income and disability.[5]
according to Raphael Sternberg, in the case of insurance for personal injury, the “damage” is an economic loss caused by an insured event, e.g., a car accident.[6]
9. subrogation
Subrogation is the right that entitles an insurer to pursue a third party for reimbursement of any payment made by the insurer to its insured.[7] [8]
10. benefit period
A benefit period begins when the insured becomes eligible to make a claim (e.g., after purchasing or renewing their insurance policy) and ends when they have received all payments related to a particular event or incident.[9]
conclusion
An insurance contract is a binding agreement that protects one party from the financial consequences of a future event, e.g., an individual buying life insurance to protect their family against the breadwinner’s death.