All About Insurance Contracts and Their Samples
Insurance contracts, sometimes referred to as insurance policies or contracts of insurance, are written agreements between an insurer and an insured. Insurers issue insurance contracts that document and define the terms and conditions of insurance coverage on specified types of loss exposures that are subject to insurance losses. Insurance contracts are entered into for a purpose that the state laws have deemed to be lawful. Because these contracts relate to a contingency, the contract is uncertain at the time of formation.
By entering into an insurance contract, the insurer agrees to provide specified indemnity or funding in exchange for consideration (referred to as the policy premium) from the insured. The insurer’s promise to provide a specified indemnity or funding at some point in the future, in the event of a loss, constitutes an insurance promise.
An insurance contract takes a number of usual and customary forms. Insurance contracts may state in very generalized or very specific terms the types of losses that are covered . However, because most insurance contracts relate to losses that are both uncertain and unknown, insurance contracts also contain a number of usual and customary exclusions from coverage, as well as conditions to coverage. Although insurance contracts contain a number of exclusions and conditions to coverage, courts tend to note that insurance policies are contracts of adhesion that should not be interpreted "in a manner so as to defeat their obvious purpose."
A variety of provisions and amendments are now frequently added to insurance contracts, including but not limited to:
These additional provisions and amendments can lead to very complex forms and interpretations of insurance coverage. Likewise, some coverage forms may take "standard" or "nonstandard" forms, which provide variations in the language and content of the policy provisions.
Insurance contracts exist in all types and sizes, they may be written on a number of standard forms. While the actual wordings of the provisions and clauses will vary, the actual forms and their intended use will not.
Essential Components of an Insurance Contract
An insurance contract is the agreement between an insurer and an individual (or a business) that details coverage, limits, and terms. Every insurance policy has the same key elements, although they may be called other names, depending on the insurance company. These key elements are declarations, insuring agreements, conditions, exclusions, and endorsements.
Declarations or "dec sheets" contain the name of the insured, address, phone number, why the policy was written, dating of the policy, where the policy is effective, and any additional coverages, before listing any insured properties/vehicles.
Insuring agreements tell you who is covered under the policy. Examples include "You are covered if: driving your own vehicle (as long as the driver has a valid driver’s license; optionally may include those who have a non-revoked and non-suspended driver’s license, those with valid permits, and employees) or letting others use your insured vehicle (as long as the user has a valid driver’s license, and optional coverage may include coverage of drivers with a suspended or revoked license)" or "You are covered if someone else is driving your vehicle." You should carefully read who is and who is not covered.
Conditions are instructions that the insured must follow or conditions under which the policy was issued. Examples are "You must pay the premium to keep the insurance in force., make sure to pay the premium on time; or you must report any accidents to the insurance company within 24 hours or as soon as you are able, if you are hurt.
Exclusions are typically listed toward the end of the contract. Examples are there is no coverage for an insured who has committed insurance fraud, there is no coverage for intentional acts or omissions of the insured; or there is no coverage for criminal acts of the insured or others acting on behalf of the insured. You should carefully read each exclusion in the policy to determine the extent to which the insured is covered.
Most auto policies will contain a number of endorsements, which are normally listed toward the end of the contract (such as the CA auto policy, and similar throughout the United States). Endorsements are changes to the standard policy, which would be considered additional coverage. Here are some commonly used endorsements:
• Named driver exclusion – excludes identified named individuals from coverage;
• Medical payments – covers medical costs associated with a car accident for the driver and passengers; or
• Rental car – covers a rental vehicle and associated costs while your vehicle is in the shop.
Different Types of Insurance Contracts
As previously mentioned, there are a wide variety of insurance contracts available in every state. Here are just a few types discussed below.
Life Insurance
Similar to the field of real estate, life insurance is divided into three main areas – Permanent, Term and Endowment. The first two types are sometimes combined into a single contract. These contracts are issued for the life of the insured. The benefits under such contracts will be paid upon the death of the insured, within the limitations of the policy. These contracts also provide the insurance company with the option of renewing the coverage, or paying out a cash benefit to surrender the policy.
A temporary or Term life insurance policy provides coverage for a limited period of time. It is a good way to obtain insurance on a fixed basis. Many people don’t realize how much Term coverage they can purchase, since it is often very affordable. Term coverage is usually only issued at a limited amount, such as $100,000, although larger amounts may be purchased subject to the insurance company’s underwriting protocols.
Health Insurance
Health insurance contracts vary in their scope of coverage and purpose. Some contracts fall under the category of income replacement. IN these cases, the person responsible for making the premium payments, may not be the same person as the insured.
There are also contracts that cover hospital expenses, physician fees, etc. Such contracts are regulated in each state, and may vary greatly from one jurisdiction to another.
The "but for" doctrine is also applicable to health insurance contracts. Generally, the payment of premiums will mean that the insurer shall be liable unless the plaintiff can show that the accident or loss would still have occurred in the absence of health insurance.
Property Insurance
Landmark cases involving property insurance are those concerning real estate damages due to hurricanes, floods, fire, mold and natural disasters. Clearly, the cause of loss may determine whether the claim may be covered.
Reading and Interpreting an Insurance Contract Sample
Reading and understanding an insurance contract sample can be a daunting task due to the complex legal language and numerous sections of information. Here, we will take a closer look at how to properly read and interpret an insurance contract sample in order to make sense of the important pieces of information they contain.
The first thing you will need to look at is the name of the insurer and the insured. This section of the insurance contract will identify the seller and buyer and should match up with the information you provided in the application. In addition, it is important to review the names of any additional insured’s that may be listed on the insurance policy.
The next thing to look at is the term of the contract. All insurance contracts will have specific start and end dates and will list the times during which coverage will be offered. In some instances, this will be for a specified period of time while other insurance contracts will provide coverage that does not expire unless coverage is canceled for some reason.
Most insurance contracts will have two parts: declarations and conditions. The declarations will summarize the specific type of insurance being purchased, price of coverage and amount of deductible. The conditions section will contain information regarding the requirements for filing a claim, the obligations of the insured as it relates to maintaining the terms of the contract and the obligations of the insurer.
Besides the declarations and conditions, the insurance contract will have another section that outlines exclusions. The exclusions section will provide a list of things that are not covered by the insurance policy. For example, if you are purchasing health care coverage, your insurance contract exclusions will list conditions that are not covered or that are pre-existing medical conditions.
Within a typical insurance contract sample, you will notice that there may be several sections that specifically address state and federal laws. These sections provide information pertaining to the law that must be followed in order to maintain the contract and avoid penalties.
Common Mistakes in Insurance Contracts
The first rule of thumb is to read everything. To many times I have seen people sign an insurance contract and then complain about the terms, without having read them. In Florida, all insurance contracts have to be filed and approved by the Office of Insurance Regulation prior to being offered for sale. A copy of the approved filing need not be offered to the policyholder unless requested by the policyholder. However, as in all other types of contracts, the terms of the insurance contract are important. I have had cases where a homeowner’s coverage has been cut in half because the policyholder did not catch that the terms of one of his policies had changed from one year to the next. All it took was opening the prior year’s policy to see what the changes were.
Another common pitfall is misunderstanding terms. Words are not defined in some insurance contracts, but it is a simple task to review the approved filing in order to understand what words like actual cash value mean. Even if you have a copy of the full insurance contract, a summary form may have been provided to you that does not contain the definitions in the back that explain how these terms are used in the context of the policy. If you do not understand the term, look in the back of the contract or the following page, or call your agent for clarification.
Another mistake I have seen is not realizing that a contract of insurance has requirements that demand a condition precedent. It has been held in case law that for certain types of claims , such as breach of contract claims, no coverage exists until the policyholder first satisfies the conditions of the contract. For example, insurance contracts have requirements for filing a claim or submitting proof of loss. Specifically, when a hurricane hits Florida, most windstorm insurance policies will require the policyholder to submit a signed sworn proof of loss within a certain time frame. If that requirement is not met, a savvy insurance company will argue that coverage is not due in court. Most attorney fee contracts will require attorneys to pay the prevailing party’s attorney’s fees. When it comes to suing your insurance company, it must be understood that in most circumstances the insurance company must pay your attorney’s fees if you win. However, if your lawyer agrees to pay the insurance company’s attorney’s fees, you are at the mercy of the trial court to either allow the insurer the benefit of their legal findings or prevent the insurer from recovering their fees. It is never a good thing to lose on appeal with the insurers’ fees hanging over you.
If my advice can be summed up into a few take-home points, they are read everything, know where to find the definitions of key terms in your policy, and keep a keen eye on the insurance contract and any correspondence to and from your insurer.
Adding a Personal Touch to Your Insurance Contract
The need to tailor your insurance contract to meet your specific and unique requirements cannot be overstated. Generic, cut-and-paste insurance contracts are a recipe for a disaster and under no circumstances should you allow it.
In order to ensure that the insurance contract has been adapted to your own requirements: There may be additional clauses contained within the contract which you feel do not apply to your business, or are too restrictive, which you could delete as per advice. Do not be afraid to amend the contract to meet your needs, if you are simply told that this will not be possible then you certainly require legal assistance. In some cases, you may find that it is appropriate to request an amendment of the wording contained within the policy. Again, do not simply accept blanket amendments. The insurer is obliged to adapt its policy to suit you, equally you are obliged to ensure that you understand exactly what it is that you are taking cover for. Do not sign on the dotted line for anything you do not understand. Once you have negotiated the fine print of the insurance contract and signed on the dotted line you must hope and pray that nothing happens and that you do not have to call upon the insurer to settle a claim. But if you do, you will know that the insurer will settle in terms of the so-called learner’s policy labels (which is a bit of an oxymoron). Policy wording is not set in stone, it is a negotiable document which is meant to protect you and the insurer, provided you have treated it on the same basis as any other commercial contract (which it is!) or with the same vigour with which you would negotiate with the telephone company, the appliance shop – you name it. The insurer has invested time and money in deciding what risks it wishes to insure or the extent of those risks. If it is a claims-free relationship the insurer should have been prepared to accept your input, the premium may well be reduced or you might have secured extension of cover. The deduction made by the insurer will not always correspond with your thinking. The vehicle that you thought to be private is registered as "U" and the premium is therefore less, or you stipulate private use and the insurer deducts premium. Whether it is a new telephone or to have your shoe repaired we all know that if a retailer makes an error it may be to your benefit, but if we are to pay extra for something we want it must be the correct colour or it is returned. Do not be bullied into accepting policy wording or conditions with which you do not agree or might cause difficulty if you try to make a claim. You have bought an insurance contract that is there for your benefit and protection, treat it that way.
Locating Trusted Samples of Insurance Contracts
When it comes to general resources for contracts, there are some well-known options for individual insurance contracts. Large online databases of contract examples may be available, and some may even be opened to guests who have not applied for membership or an account.
Connecting directly with your local insurance agency should be an option as well. Many of these offices have a variety of form requirements from different insurers, and even if you are not an insured of theirs currently, they may be able to give you access to the info you need about contracts . However, the best way to find documents in this case is to go directly to the insurer that you are interested in finding coverage from.
In addition to contacting insurers directly, look for small print publication companies that have distinguished themselves in the world of insurance contract samples. These companies have solid reputations that they have worked hard to earn, and even though they may charge a bit of money for access to their sample contracts, it is often worth the cost.