In the insurance policy, the insured pays the amount of the premium. Insurance contracts have distinct legal characteristics that make them different from other legal contracts. In an insurance contract a prospect makes an offer and an insurer accepts it. This chapter examines the characteristics of insurance contracts. Many contracts of insurance are, in essence, promises by the insurer to indemnify the insured against specified types of loss, damage or liability. Previous Topic Previous slide Next slide Next Topic. Risk-distributing. 2. Monday, July 23, 2012. in Commercial, Law. Material Facts. Life insurance is a contract that offers financial compensation in case of death or disability. In a unilateral contract, an insured person pays the insurance policy premium. The consideration for the insurer under an insurance contract is a_____(premium/sum insured) 3. Key Takeaways . Each member pays a certain amount to the general fund that is specifically made to address the loss agreed upon. There is a process involved in the formation of the contract. Insurance. INSURANC E CONTRACT 2. Primary Functions 2. • Insurance contracts are aleatory in nature, which means The performance of one or both parties is contingent on the occurrence of an event that may never materialize. People enter into insurance contracts for the protection these contracts provide. For a more enjoyable learning experience, we recommend that you study the mobile-friendly republished version of this course. With the above explanation, we can find these following characteristics, which are generally celebrating in the case of life, sea, fire, and general insurance. Legal contract between insurer and insured Designed to serve very specific purpose Special characteristics not found in other contracts At the end of this module you will be able to: Define six characteristics of an insurance contract Explain why they are necessary for insurance to function A large number of insured persons: To spread the damage easily and easily, a large number of individuals should be insured. Moreover, the policyholder can’t transfer the insurance policy without the permission of the insurer. A small number of individuals can also be co-operative insurance, but it is limit to a small area. For a more enjoyable learning experience, we recommend that you study the mobile-friendly republished version of this course. A legal contract is a legally enforceable agreement between two or more parties. Unilateral. If he … To be a legal contract, an agreement must have all of the following five characteristics: ... Insurance policies are unilateral contracts. Fire insurance is a contract of good faith. 1.Provide protection: The primary function of insurance is to provide protection against future risk, accidents and uncertainty.Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. If there is no loss there is no liability even if there is a fire. Distinct Legal Characteristics of Insurance Contract Insurance contracts have distinct legal characteristics that make them different from other legal contracts. Payment to insured in the event of loss as per the agreement and terms of … The insurance contract, however, is aleatory ie., the contracting parties know that the amount to be paid by each party is not equal. The insurer is liable only to the extent of the actual loss suffered. The most common of these features are listed here: Aleatory. Previous Topic Previous slide Next slide Next Topic. Take me to revised course. Several distinctive legal characteristics have already been discussed. Several distinctive legal characteristics have already been discussed. CHARACTERISTICS OF A CONTRACT OF INSURANCE 1. Insurance is a device to share the financial loss, which may fall on an individual or his family on the happening of a specified event. An insurance contract is a contract of uherrimae fidei, i.e., of absolute good faith both parties to the contract must disclose all the material facts and fully. Characteristics of Insurance Contracts - Part 2; Previous Topic Next Topic. Primary functions. Some life insurance policies even offer financial compensation after retirement or a certain period of time. unique characteristics of insurance contracts • The insured must have an insurable interest. Sharing of Risks . The insurance functions can be divided into three parts: 1. Characteristics of Fire Insurance. It serves to distribute the risk of economic loss among as many as possible to those who are subject to the same kind of risk. Some of the most notable characteristics of insurance contracts are that they are unilateral, personal contracts that require utmost good faith and have an associated parol evidence rule and aleatory. Other Functions. DISTINGUISHING CHARACTERISTICS OF INSURANCE CONTRACTS; HOSPITALIZATION Courts always have great difficulty in distinguishing con-tracts of insurance' from other contracts containing obligations contingent upon the happening of certain events. This Course has been revised! As we noted earlier, most property and casualty insurance contracts are contracts of indemnity; all insurance contracts must be supported by an insurable … Choose from 500 different sets of insurance contract characteristics flashcards on Quizlet. The purpose of insurance is to indemnify the insured, or to bring insured back to the same financial … Insurance is defined as a contract, which is called a policy, in which an individual or organisation receives financial protection and reimbursement of damages from the insurer or the insurance company. Similarly, many commercial contracts will include a promise by one party to indemnify the other against specified types of loss, damage or liability. Sources of … An insurance policy is a legal contract that is agreed upon by two or more parties. Insurance contract 1. The policy-holder and the insurer must disclose all the material facts known to them. An insurance contract is: • Aleatory - The performance of one or both parties is contingent on the occurrence of an event that may never materialize. Characteristics of Insurance: One can easily differentiate these characters of insurance as below: 1. At a very basic level, it is some form of protection from any possible financial losses. Life insurance contract may be defined as the contract, whereby the insurer in consideration of a premium undertakes to pay a certain sum of money either on the death of the insured or on the expiry of a fixed period. For any insurances contract not only premium is charged but it also obligatory to pay the premium in time.