Parts of an insurance contract

Parts of an insurance contract

• Definitions - define important terms used in the policy language.
• Insuring agreement - describes the covered perils, or risks assumed, or nature of coverage, or makes some reference to the contractual agreement between insurer and insured. It summarizes the major promises of the insurance company, as well as stating what is covered.
• Declarations - identifies who is an insured, the insured's address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount.
• Exclusions - take coverage away from the Insuring Agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.
• Conditions - provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not met, the insurer can deny the claim.

Life insurance specific features

• Incontestability - in the United States, life insurance contracts may not be contested by the insurer at any point after the contract has been in force for two years. The insurer has the burden to investigate fully anything they wish to make sure the insured is an acceptable risk within those two years. Any material misstatements on the insurance application (which generally forms a part of the contract) cannot be used as a reason for the insurer not to pay the death benefit, as long as it does not constitute fraud on the part of the insured. The insurer's only recourse if there is no fraud is to can adjust the death benefit to correct for the insured's age or sex if they different from what was stated on the application.