- 1 What is Insurance Contracts | Kinds of Insurance Contracts
- 2 Unconditional Consent – Insurance Contracts
- 3 Accuracy of consent
- 4 Legal Purpose
- 5 Power of contract
- 6 The Ultimate Faith
- 7 Insurable interest
- 8 (a) Insurable interest in property insurance
- 9 (b) Insurable interest in life insurance
- 10 Indemnity Policy
- 11 Doctrine of Subrogation
- 12 Types of insurance policies
- 13 Agreement of indemnification
- 14 Life insurance contract
- 15 Difference Between Indemnity Contract and Life Insurance Contract
- 16 Liability Insurance:
- 17 Difference Between Insurance and Wagering Contracts
- 18 Features of insurance policy
What is Insurance Contracts | Kinds of Insurance Contracts
What is Insurance Contracts | Kinds of Insurance Contracts – We have already noted that the element of contract was introduced into the insurance business early in its evolution, about three and a half hundred years ago. Insurance is a special type of business contract. Since it is a contract, it naturally comes under the contract act of 1872. Therefore, in order to understand the significance of insurance contracts, it is necessary to be aware of the various sections of contract law, especially the characteristics of legally valid contracts.
According to the definition of treaty in Article 2(h) of the Indian Treaty adopted by Bangladesh, ‘an agreement enforceable by a court. (agreement) is called a contract.
Every legally enforceable contract must have the following elements:
- Unrevoked offer
- Unqualified acceptance
- Consideration or Form of Contract
- Genuineness of Consent
- Legality of Object
- Capacity to Contract
Irrevocable Offer A proposal is defined in Section 2 (a) of the Contracts Act as, “An offer is an expression of a desire by a person to do something or refrain from doing something for the purpose of obtaining the consent of another person.” The offer may be made in writing or verbally or by special conduct and may be withdrawn until the moment it reaches the attention of the intended party. If the offer is not accepted within the specified period, if the time is not fixed, it shall be cancelled.
An offer served by post is incomplete until it reaches the intended party. Likewise, an offer by post is not effective until it is withdrawn and notified to the addressee.
Unconditional Consent – Insurance Contracts
Consent of the other party to the offeror’s offer under Section 2 (b) of the Contract Act
If so, the proposal is deemed to have been accepted. Once the proposal is accepted, it becomes an agreement. Consent needs to be unconditional. Conditional acceptance is called a counter offer.
In the manner prescribed by the proposer, consent must be expressed in the usual and appropriate manner, if no such manner is prescribed in the proposal. If the offeree violates the terms set forth in the offer and expresses consent in any other manner, the offeror may in due course demand the expression of consent in accordance with the manner stated in the offer. Otherwise he is deemed to have accepted the modified rules.
Interest or Formation of Contract Interest of contract is defined in Section 2 (b) of the Contracts Act as follows, “When the promisor or any other person does or refrains from doing anything or promises to do or refrain from doing anything at the will of the promisor, this Every kind of act, break and promise is called an interest in the contract.”
Every legally valid contract must have an interest. It is imperative that a contract without interest be lawfully formed, otherwise such contract is worthless in the eyes of law. As per the provisions of various statutory laws, specific formation procedures are also to be followed.
Accuracy of consent
If two or more persons agree to enter into an agreement on the same matter in the same sense without any illusion, deception, use of force, intimidation or without any illegal influence, then it is called proper consent. It is legally imperfect if any party does so out of error or under the influence of anything mentioned above.
According to Section 10 of the Indian Contract Act prevailing in Bangladesh, every act performed for illegal purposes or illegal interests is illegal. The purpose and interest of the contract shall be valid if it,
(a) is not contrary to any provision of the Law;
(c) is not deceitful;
(d) not causing physical and financial harm to others; And
(e) not to be contrary to the moral standards and interests of the public in the eyes of the Court.
Power of contract
According to the contract law, every healthy-minded and adult person can execute a contract unless it is specifically prohibited by any law. On the other hand, a minor person i.e. a person under the age of 18 years is a drunk or perverted brain person and a citizen of the enemy country, etc. do not have any power to make a contract. The association organizations do not have the legal right to enter into any agreement other than the published memorandum.
In order for an insurance contract to be legally included in the category of a valid contract, the above essential elements must be fundamentally contained in it. In addition, it must also contain the following insurance-related elements in order to make it a category of insurance contracts.
The Ultimate Faith
The legal practice of a normal business contract is that the buyer has to carefully examine everything and accept something. According to this practice, the seller is obliged to publish only what the interested buyer wants to know about the subject matter. It is the responsibility of the buyer to provide his satisfaction by asking the seller a number of relevant questions. On the other hand, it is different in the case of insurance contracts.
The insurance contract is executed on the basis of ultimate goodwill and both parties to the contract have to faithfully abide by it. If neither of the two parties adheres to this principle of ultimate trust, the other party may abandon the agreement. Since insurance transfers the risk from one party to the other, it is essential to have the ultimate trust and simplicity between the insurer and the insurer.
What is Insurance Contracts | Kinds of Insurance Contracts
In order for the defendant to measure the fair dues i.e. premium in lieu of the risk and the insurance provided, all information about the insurance matter and all the things surrounding it must be disclosed. Concealing something relevant is considered a serious offense and the defendant may declare the contract void if he discovers it. In all these agreements, the person seeking insurance must disclose to the insurer all the important information that is known to him and under normal circumstances is believed to be known to him. Important information refers to what is likely to influence the wise insurer’s decision to determine the premium or accept the risk.
Usually, the insurer asks the person taking insurance to fill out the proposal form. This form is designed in such a way that it provides all the important information affecting the opinion of the person receiving the insurance by the insurer. The proposal form is accompanied by a declaration that the information provided by the person seeking insurance is at best true to the best of his knowledge and beliefs. Even if the insurer receives the information according to the accepted proposal form, it does not mean that the insured can suppress any important information about the subject on which no question has been asked in the proposal form.
Whether the insurer asks or not, he has to disclose all the necessary and important facts or information related to it. However, unless required in the insurance contract, the insured does not disclose any important changes prior to the contract. But if it is a renewal agreement, the insured must disclose all the important changes that have taken place during the period of the renewal agreement from the time of the signing of the contract to the expiry of the term.
It is not only the responsibility of the insured to disclose the full details of all the important information, but also the responsibility of the insurer. He also has to disclose all the important information affecting the opinion of the insured.
Unless there is an inquiry, the insured is not required to disclose the following information.
- Risk-reducing information;
- Defamatory information of the public;
- any information which the insurer is known or known to;
- Information which the insurer has avoided in writing or by conduct; And
- The information that is known by the terms of the beam itself.
This principle of ultimate goodwill has to be followed in all types of insurance contracts and this policy has to be followed till the last term of the contract. It is always important to note that the other side should not be harmed by the deliberate misrepresentation of something on one side. If any kind of fraud, secrecy or misrepresentation of important information in the insurance cancels the insurance contract, the insured receives a refund of the premium if the contract is canceled after the innocent misrepresentation is proved.
The insured must have an insurable financial interest in the contents of the insurance so that the financial loss to the insured is not caused if it is destroyed or destroyed. Therefore, by insurable interest, we mean the financial interest over the content of the insurance, which, if protected, causes financial gain and if destroyed, there is a financial loss.
That is, the financial interest of the subject is the insurable interest. A very nice comment has been made about insurable interests in Lucena v. Croforve. “If there is such a relationship between the insured and the content of the insured that if the content is safe, it will be financially beneficial and if it is damaged or destroyed, then the insured will suffer financial loss, only then it can be said that the insured has an insurable interest in the said content.” ”
The insurable interest of the insured must be real and genuine and not merely an idea or concern. A contract of insurance without insurable interest is not a valid contract in law and will be treated as a contract in court. Contracts without insurable interest may rather be called gambling contracts.
One cannot legally take life insurance unless there is an insurable interest in the life insured. Life insurance without insurable interest shall be deemed to be cancelled. The purpose of this policy is to stop gambling in relation to insurance contracts. If a person accepts insurance on the life of another person, the name of the interested person, for whose benefit and benefit or for whose interest the insurance policy is accepted etc. should be mentioned in all the insurance documents.
Otherwise the insurance policy will be considered cancelled. Similarly, in all valid insurance contracts including fire, marine and accident insurance, the insurable interest of the insured in the subject matter of insurance is considered as a fundamental element of the validity of the insurance contract. Since there is an element of act of God in the contract of insurance which no one can take advantage of by taking advantage of it, it is like an insurable interest.
Legal policy has been introduced. According to the presence of insurable interest in the insurance contract it can be divided into two categories,
(a) Insurable interest in property insurance
If a person has a legal right to protect a property and has an expectation of financial gain or loss or liability due to its destruction, then that person has an insurable interest in the said property. If a person is the sole owner of the property, there is no question of his insurable interest. But if a person’s relationship to a property is less than sole ownership, then there is some difficulty in determining his insurable interest. In particular cases where a person does not own the property but has an insurable interest in it, such as—
– Mortgagee, mortgagor etc. Hence permanent subjects, lessors, lessees, heirs of mortgaged property, mortgagors, mortgagees, conditional buyers and sellers, bailees and executors etc. have insurable interest in the property owned or related to the person. Therefore, if a person has to acquire or have an insurable interest in a property, he has to be related to that property in such a way that he has financial gain in securing it and financial loss in its destruction. An example from boat insurance will make the matter clearer.
When a vessel sails on cargo charter, the ship owner risks loss of the vessel, the charterer risks loss of rent, and the cargo owner risks loss of cargo and profits. All these people have interests here. Because everyone has some interest at risk and the insured will suffer some loss if an accident occurs. Every person concerned has an insurable interest in creating such liability in case of covert filing. For example, if fruit syrup ever goes on sale creates a risk of poisoning, both the wholesaler and the retailer have an insurable interest in that potential liability.
(b) Insurable interest in life insurance
Insurable interest is an essential element of life insurance contract. Every insurance contract without an insurable interest amounts to gambling and is void under contract law. Everyone has an insurable interest on their own life. In the case of an offer of insurance on the life of another person other than an offer of insurance on one’s own life, the offer of insurance shall not be accepted unless adequate proof of the insurable interest in the proposed insurance is filed.
An offer of sum life insurance may be accepted up to the extent of any legitimate financial interest of the offeror in the life of the proposed life assured. Spouses have an insurable interest in each other’s lives. A parent has an insurable interest in the life of a minor child. In the case of other family relationships such as brothers, sisters, uncles, cousins, cousins, cousins etc., mere kinship without any reasonable expectation of benefit or legitimate economic interest is not sufficient to constitute an insurable interest.
Some business relationships may also create insurable interests, such as one partner in a partnership having an insurable interest on the life of the other partner and on the life of the spouse.
In case of life insurance, insurable interest must exist at the time of issue of policy. But it is completely opposite in case of boat insurance. In this case the insurable interest must exist when the insured goods are damaged in an accident even if it does not exist at the time of taking out the policy. This is because marine insurance policies change hands many times during the insured period and the insurable interest also changes accordingly.
But in case of fire insurance the insurable interest has to be in both cases. That is, it is essential to have an insurable interest both at the time of insurance and at the time of occurrence of loss. In the case of fire insurance, it is often seen that a fire is deliberately set and a claim is made for the insurance money.
Therefore the insurable interest is also limited in that case and cannot be assigned to any third party without the written order of the insurance company.
All insurance contracts other than life insurance, accident insurance and sickness insurance are called contracts of indemnity. According to this policy in all these insurance contracts the insurer shall in no case pay more than the sum insured to the insured in case of actual loss or total loss of contents caused by the insured accident. The underlying implication of this principle is that the insured cannot earn any profit through the insurance contract.
The main purpose of insurance is to transfer the risk from one person to another and provide assurance to the insured and therefore only the cash value is paid to him in case of loss. If more than the actual loss is paid, the insurance contract means more than a mere transfer of risk and there is also an opportunity to make a profit. If this is ever allowed, the insured will voluntarily destroy the property and try to profit and engage in anti-social activities.
Full adherence to the compensation policy is also vital for the sake of national interest. Thus, in all insurance contracts other than personal insurance, the insured can recover only the cash value of his actual loss, but cannot recover more than the actual loss even if he accepts a higher sum insured.
Of course, this indemnity policy does not apply to personal insurance. In all these cases, the insured gets the money as per the contract even without any financial loss. Loss of life can never be quantified by paying monetary value in life insurance. Although life insurance is founded on the principle of indemnity for the death of a life, it is not an indemnity for death loss or loss arising out of death, but only an assured contract to pay a fixed sum upon the death of an insured life. This policy also applies to accident insurance.
In the case of indemnity contracts where excess insurance is provided (where the insured takes out an amount insured for more than the actual value of the property), even then only the actual loss is paid – not the insured portion. Again, if the property is depreciated (if the insured portion is less than the actual value of the property) the insured is considered as self-insurer for that deficient portion and in case of loss, he has to bear the proportionate share of the loss.
Generally the policy of indemnity is not mentioned in the insurance policy, it has to be ascertained on the basis of common law. According to this policy, the insured cannot recover more compensation than the actual loss from any insurer. Not only that, but for the same subject matter, it cannot collect more than one compensation from other insurers except for the proportionate part of the actual loss.
Once the full indemnity is accepted from one insurer, the insured cannot re-accept it from any other insurer. This principle, adopted as an indemnity principle, is known as “chadar principle” and according to this principle, if an insurer pays full compensation for a loss, it has the right to recover a proportionate share of the same from other insurers.
Doctrine of Subrogation
In case of insuring one’s own property against a particular risk, the doctrine of substitutability under indemnity policy is similar to the decision of indemnity policy. A person can only recover the actual cost of loss or damage to property. After the insurer has paid full compensation to the insured as per the contract, if there is any abandoned value of the damaged property or any recovery of the said property or there is any right from a third party regarding the said property, the insurer, not the insured, shall be the recipient of all such. If the insured is allowed to keep these, he will recover more than the actual loss and it will be against the indemnity policy.
This rule is called the doctrine of substitution. In fact, this is not a doctrine, but only a principle to be observed. Under this policy the insurer becomes the recipient of all rights of the insured in respect of the subject matter of the insurance. An American case provides a good definition of this principle
Thus, “Substitution is the substitution of one person for another as the holder of a betterment or of any equitable claim whereby the substituted person inherits the rights of the other person in relation to any claim, right, remedy or security.”
However, according to the doctrine of substitution, the insurer is entitled to the benefit of the amount paid. Therefore, if the insurer has paid compensation to the insured for the loss and the alternative rights and remedies of the insured have been substituted for the insurer, in that case the insurer can enjoy the same amount of benefits as has been paid to the insured.
If anything more than this is collected, he will be considered as liable. Similarly, if the insured himself receives the compensation money from the other party after the payment of compensation by the insurer, then he will be considered as the guarantor of the insurer for the subsequent compensation. This doctrine is further clarified in an American case. It has also been said in the judgment of this case that after the insurer has paid the compensation amount to the insured, if anything more than the amount paid in the policy is recovered from the third party at fault, it has to be paid to the insurer.
However, he can claim a fair share of the cost of collection. It is to be noted that only the rights of the insured are superseded after settlement of the claim. Again the insurer has to enforce these rights on behalf of the insured. Here the rights of the insured shall be the same in the case of the insurer. Therefore Lord Kairach said, “The claimant shall have only such right as the insured himself could have raised for damages.”
This will be more clearly understood from the following examples:
(1) A person insures goods stored in a warehouse by fire and the insurer pays indemnity if the goods are destroyed by fire. The insurer shall be the recipient of the right of the insured against the warehouse keeper on the judgment of the trial. [North British & Mercantile Insurance Co. v. Liverpool & London & Globe Insurance Co. (1877)]
(2) A seller contracts to sell a house insured against fire. There was no mention of insurance in the sale agreement. Some time later the house was partially damaged by fire, and the seller recovered £330 from the company. Later in the sale, while charging and accepting the sale price, the seller did not exclude the amount received from the insurer. In the case brought by the insurance company, it is decided that the insurer will get the sum insured from the seller.
(3) In case of loss of a ship secured in a place, after the insurer has paid full compensation for it, the ship has been found. In this case the vessel shall be deemed to be the property of the insurer.
This doctrine does not apply to life or personal insurance. For example, if the death of the insured is due to the fault of a third party, his legal heirs can recover additional compensation from that party apart from the sum assured. The insurer has nothing to do for the said additional compensation.
Types of insurance policies
Insurance contracts can be classified in various ways. Eg: Life insurance contract and non-life insurance contract. All insurance contracts other than life insurance contracts such as fire, marine and miscellaneous insurance contracts are treated as non-life insurance contracts. Again, from the point of view of insured content, the insurance contract can be divided into two parts – personal insurance contract and property insurance contract. Life and accident insurance policies are treated as personal insurance policies and all other insurance policies relating to property are treated as property insurance policies. According to the underlying features, the insurance contract is again divided into two parts – life insurance contract and indemnity contract. The aforementioned non-life insurance policies or property insurance policies are also termed as indemnity contracts.
Agreement of indemnification
All types of insurance contracts except life insurance contracts are called indemnity contracts.
Such as fire, marine insurance etc. In all these contracts, in lieu of receiving a fixed amount of premium, the insurer undertakes to indemnify in case of damage to the contents insured due to the said causes. In this case, the insurance company will be obliged to pay the same amount of damage to the insured contents. For example, if a house insured for BDT 15,000 is completely destroyed by fire, the insurance company is obliged to pay the full compensation.
However, if the value of the destroyed house at the time of destruction is 12,000 taka, then the insured will get only 12,000 taka, but if the insured value is 15,000, he will not get it. It is worth noting that the insurance company will pay only that amount of damages as per the contract. By insurance whereby financial gain or profit is made that is why this arrangement has been made.
Life insurance contract
A life insurance contract and an indemnity contract are not the same. If something is destroyed, it can be compensated in money or replaced. But if a person dies, it cannot be compensated in money. No matter how much money is paid as compensation, one who has departed from this world cannot be brought back again. That is why a life insurance contract is not a contract of indemnity. Why is the dead body of the insured not valued or any market value is determined on the death of the insured.
Rather, it is an assured contract to pay a fixed sum upon death of a life insured. So it can be called a contract of assurance. Here the insured must pay the sum assured as per the contract whether the insured dies or reaches the specified age. In a life insurance contract, the contracted event must occur at some point or the other. Because, if the policyholder does not die suddenly due to some accident, even after many days, the person must die naturally after reaching a certain age limit. Man is only mortal, there is no other alternative. This is why life insurance is sometimes called guaranteed insurance.
Difference Between Indemnity Contract and Life Insurance Contract
There are substantial differences between life insurance contracts and indemnity contracts. This is because human life cannot be evaluated by money. On the other hand, it is called an indemnity agreement as it is possible to compensate the property by giving money or restitution. In case of indemnity contract, if the insured value is less than the insured value, the insured can recover only the amount of actual loss and in case of total loss, he cannot recover more than the insured value.
In case of life insurance the risk or event insured will definitely become a claim, not in case of other insurances. The ship may or may not be in distress. Fire and marine insurances are for a fixed period. For example, in the case of boat insurance, a term insurance policy for a specific period or a voyage insurance policy used for a specific purpose. The risk occurring during this period is quite determinable, but it is different in the case of life insurance. Because, such insurance policies are taken for a long period and sometimes even for whole life.
The insurable interest presented in the case of indemnity insurance can be measured by the amount. On the other hand, the insurable interest in life insurance cannot be measured by money. In life insurance the insured has to have an insurable interest at the time of taking the policy.
On the other hand, in marine insurance both at the time of occurrence of loss and in fire insurance both at the time of taking the policy and occurrence of loss, the insurable interest has to be vested. It is divided into three parts; such as Allocation of risk is generally simple in life insurance contracts. Here to all lives , High quality, low quality and uninsurable.
But risk allocation is complicated in the case of indemnity insurance. Here the segmentation depends on property structure, season and other factors. In life insurance as per co-premium plan the premium is usually charged but in case of indemnity contract the premium will be equal to the cost of insurance.
Joint insurance is advantageous in terms of life insurance, On the other hand, reinsurance is quite helpful in case of indemnity contracts. Life insurance has both these elements but indemnity contracts only have the defense element. Life insurance risk increases every year, but if indemnity insurance has that potential, it is possible to replace or repair old parts of the property to keep the contents in much better condition.
However, with increasing age in life insurance, no matter how much care is taken, the probability of death increases. Insurance contracts can also be divided on the basis of different stages. According to the nature of the interest affected in the occurrence of the event, insurance contracts can again be clearly divided into the following four categories. For example:
Personal Insurance: In these contracts, instead of receiving a premium, the insurer undertakes to pay a fixed amount to the insured or his heirs on the occurrence of an event. This includes life, accident, health or sickness insurance. Here the amount of compensation is not the actual loss (which cannot even be determined) but only the fixed sum agreed upon by both the parties. Because the subject of all these insurances is someone’s life or health, the actual loss cannot be measured by money.
Property Insurance: All insurance contracts relating to human property belong to this category. In this case the insurer has to pay an amount equal to the actual loss as compensation to the insured in case of damage to the insured contents. Fire, marine and other insurances fall under this category. Here, if the loss is less than the insured value, the insured can recover only the actual loss amount and if there is a total loss, he cannot recover more than the insured value.
Liability Insurance: Here the insurer provides financial compensation for the liability caused by the employer to third parties or workers of the insured due to accidents as per the legal provisions of the country. This includes third party insurance and workers compensation insurance.
Surety Insurance: It can be called as a type of insurance. The insurer undertakes to indemnify the insured for damages caused by the dishonesty and fraud or breach of trust or contract of any person with whom the insured has a contractual relationship. Trust insurance, insurance etc. fall under this category.
An insurance policy may also contain multiple insurances, eg motor insurance may be combined with accident insurance.
Difference Between Insurance and Wagering Contracts
Lord Manfield termed insurance as a contract of speculation and expressed the opinion that it is difficult to separate the principle of insurance contract from betting contract as there is a lot of similarity between the two. Justice J. Willich, however, opined that wagering and contract are not the same. Such a contract depends on the fact that the person making the contract has any interest in the subject matter of the contract.
However, insurance contracts differ from betting contracts in many ways. Before discussing their differences, it is necessary to shed some light on what these two agreements mean.
By contract of insurance we mean here a person or institution called the insurer, instead of receiving some sum called premium in lump sum or instalments, enters into an agreement with another person in the name of the insured that
(a) he will pay a certain amount to the insured in the event of the occurrence of the specified event or
(b) a specific sum of money. In case of damage to the contents caused by risk, the amount will be compensated. A betting contract, on the other hand, is a type of contract in which two people who have opposite predictions about an uncertain future event agree that depending on the determination of that event, one party will win over the other and that party will pay him a certain sum of money or the subject of the bet.
will surrender Carlill Vs. Carbolic Smokeball Co. The judge of the case named Mr. Hawkins, J. defines a wager as an agreement between two persons having conflicting opinions as to the outcome of an uncertain future event by which, if the outcome of that event be the same, one party will receive from the other a certain sum of money or thing, and if the outcome If it is otherwise, then the second party will get that amount of money or things from the first party.
Neither party shall have any interest in the said contract unless the wager is created. There is no place for compensation in the contract. Neither party hereto has any interest in winning or losing, other than money or stakes, and neither party has a genuine contractual interest in entering into such agreement.
From the above two definitions, we point out the following differences between them. The main difference between insurance contract and wagering contract is that the policyholder has a financial interest in the subject matter of the insurance, while neither party has an insurable interest in the wagering contract. In a wagering contract, the risk of loss is created by the contracting party’s acceptance of the contract, but in the case of an insurance contract, the insured accepts the policy because his interest in the subject-matter of the insurance may be endangered.
Participants in a betting contract assume the risk and receive money or something else if an event occurs or otherwise; Insurance risks on the other hand are pre-existing; It is only transferred through the contract and thus there is no opportunity for the policyholder to earn any profit through the policy.
In all insurance contracts other than life insurance, the policy of indemnity is followed i.e. in case of loss of contents due to an accident, the insurer pays the insured the actual loss or the maximum sum insured, but this policy is absent in wagering contracts. Betting contracts are entered into with a gambling attitude for sheer pleasure or financial gain.
Hence it is considered as anti-social activity as it is not conducive to economic development. Gambling is condemned as immoral. On the other hand, insurance helps economic progress by reducing risks by pooling multiple risks. This is why betting contracts are legal in almost all countries forbidden On the other hand, it is desirable for all countries to improve the insurance business by encouraging public support.
Thus it is clearly evident that an insurance contract is not a wagering contract, nor is it a gambling contract. Although the learned Lord Mayfield has at one place called it a contract of speculation, yet later this concept has been proved wrong and the aforesaid statement has not come into force. The insured must have an insurable interest in the content of the insurance contract and due to the existence of an indemnity policy, there is no possibility of the insured benefiting from the insurance contract other than only actual compensation.
Features of insurance policy
An insurance policy has several features. Details of these features are given below:
(1) The amount which the insurance company agrees to pay as compensation to the insured in the insurance contract cannot be equivalent to the actual loss. Insurance contracts are therefore called aleatory contracts. Another type of contract where one party agrees to pay the other party an amount equal to the actual loss as compensation is called a commutative contract. In the insurance contract, the insured pays the premium to the insurance company and in return, if the insured suffers a loss, the insurance company pays him more than the premium paid by the insured.
(2) In the printed form of the insurance company, written in the same manner, the insured has to accept the offer of insurance contract. The Insured cannot modify this offer or add any additional conditions. This is why the insurance contract is called a contract of adhesion.
(3) Contract of insurance is a unilateral contract. After paying the premium there is nothing more for the insured to do. All future obligations related to the contract rest with the insurance company. The insurance company undertakes to pay compensation to the insured. This is why insurance contracts are called unilateral contracts.
(4) Contracts conditional on insurance. Even though the contract is completed with the payment of premium, both the insurance company and the insured are bound to fulfill all the conditions thereafter. How many conditions have to be fulfilled by the insured to get the compensation? For example, in the case of fire insurance, if the insured property is destroyed by fire, the policyholder has to present proof of the damage.
(5) All forms of insurance are contracts founded on ultimate faith. Before executing the insurance contract and at the time of offering the insurance, all the necessary information regarding the contents of the insurance should be clearly communicated. It is, however, a duty on the part of the insured.
Because if any necessary information is not told, it will not be possible for the insurer to have a proper idea about the correct amount of insurance risk or to determine the correct rate of premium. After the insurance contract is executed, if there is evidence that the insured has concealed any necessary and important information, the insurance policy will be canceled.
(6) Contract of insurance is a special type of private contract. Insurers and policyholders consider not only the contract of insurance, but also the conduct and reputation of each other. When a property is insured against potential loss, the general public assumes that the property is insured. But actually the insurance contract is executed between the insurance company and the property owner even if the ownership of the insured property changes, the insured cannot change immediately.
In case of such change of ownership, the insurance company’s permission must be taken to assign the title of the insurance. No such permission is required in the case of assignment of life insurance rights. In fact, the assignment of life insurance rights takes place without the permission of the insurance company.
(7) Contract executed as a whole. No part of the premium is refundable. If the insurance company accepts the risk and the contract is valid, the premium is not refundable at all. If the insurance company does not accept the risk, then the premium paid has to be refunded in full. What is Insurance Contracts | Kinds of Insurance Contracts What is Insurance Contracts | Kinds of Insurance Contracts