Basic Insurance Terms And Definitions

What Is Meaning Of Term Insurance?

Insurance plays a central role in the functioning of modern economies. Life insurance offers protection against the economic impact of an untimely death; health insurance covers the sometimes extraordinary costs of medical care. So, what is meaning of term insurance and what is legal definition of insurance contract?
Insurance,basic, terms, definitions, coverage

Insurance an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

It is promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer.

Legal Definition Of Insurance Contract

In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language.

For example, in a car insurance policy, the insurance company agrees that if the car is damaged, the insurance company will pay the cost of repairing it. Under an income protection policy, the insurance company agrees that if its client is unable to work, the insurance company will pay its client an agreed amount.

The reason we call an insurance policy a special type of contract is because there are certain characteristics that relate to an insurance policy that do not relate to most other contracts. In particular, an insurance policy is a contract of “utmost good faith”. This means that the insurance company and the insured person have certain very important obligations that do not exist in normal contracts. These include the duty of disclosure and the duty not to make any false statements in relation to a claim. This duty of good faith is why insurance companies can refuse to pay your claim if you have not told the insurance company all material information when you applied for or renewed the insurance.

Insurance policy is a type of contract and it is important to remember that the duties of the insurance company and the insured person are largely contained within that contract, often called a policy. So before jumping to conclusions about what the insurance company should or should not do, or what your obligations might or might not be, it is important to first read your insurance contract or policy.

Basic Insurance Coverage Definition

The basic insurance policy is often cheap or is included and doesn’t cost you anything, but the coverage generally limits the liability. People who chose the basic insurance policy doesn't care much about the risk or they want that kind cheap insurance, because of legal requirements.

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