ESSENTIALS OF INSURANCE CONTRACT


A contract of insurance is completed as soon as the insurance company accepts the premium. The following are the essentials of an insurance contract:-

(1) Written Agreement
Insurance is a written agreement between the insurer and the insured wherein the insured makes an offer and the insurer nccepts his offer. Thus, the filling up of a proposal form by the proposer is an offer and the notice of acceptance of the proposal form by the insurance company is an acceptance of insurance. So, insurance agreement must be in writing.

(2) Consideration
Under insurance contract, the insured takes over particular risk of the insured for a consideration called remium Tho insurer promises to pay to the insured or his nominee a certain sum on the happening of an uncertain event.

(3) Competency
A proposer must be competent to enter into contract. If the insured is of sound mind and has attained the age of majority, he is said to be competent. An insurance policy taken by a legal guardian on a minor's life is a valid contract.

(4) Lawful Object
The object of insurance must be lawful and should not be illegal, immoral or against the interest of the public.

(5) Mutual Faith
There should be mutual faith between the insured and the insurer. The insured should disclose all the possibilities of-losses in his proposal form. He should not misrepresent to the insurer and should pay his premium in-timel The insurer should pay the insured the assured amount at the time of loss without causing unnecessary hardship.

(6) Certain The agreement between the insured and the insurer should not be vague, loose and uncertain. The terms and conditions must be clearly understood by both.

(7) Possibility of Performance On insurance, the agreement must be capable of being performed. A promise to do an impossible thing can not be enforced.

(8) Contract of subrogation The doctrine of subrogation is applicable in the case of general insurance. When the insured is compensated for the loss caused by the damage o thc property insured by him the right or ownership of such property passes on the insurer.

(9) Insurable Interest
A person can not enter into a contract of insurance unless he has insurable interest in the subject matter to be insured.

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