You probably have insurance, such as home, auto, or health insurance. Even though you pay a small fortune in premiums, you probably know next to nothing about the insurance contract itself. By insurance contract, I am referring to that mass of pages that are attached to the first few pages of your policy. There are some basic definitions, as well as certain terms and conditions, of which you should be aware.
The main purpose of an insurance policy is to indemnify, or reimburse, you for a loss that can be measured in terms of money. So, if you look within your insurance contract, you will likely see the words indemnify or indemnity peppered throughout the document. The basic principle of indemnity is that the insurance company will not pay you any more than the amount of the loss suffered. If your house burns to the ground, and you were covered for $500,000 for the dwelling, the company is not going to pay you $1,000,000 so you can go get a bigger house.
Another basic principle of your policy is that it has a legal purpose. In other words, the policy does not encourage you to engage in illegal activities. If it does, the contract is not valid. The purpose of your insurance is to protect you from damages suffered to your home, car, or health, etc.
In addition, your policy should contain a clause regarding legal capacity. If you are a minor, or incompetent, then the contract could be deemed null and void when it comes time to file a claim. This clause protects the insurance company in the event that the person they have insured under the contract has misrepresented their age or mental status. Most insurance applications contain questions about age and/or mental conditions, and if answered truthfully, the insurance company will deny coverage before issuing the policy. However, in some cases, the applicant lies when answering these questions. The legal capacity clause protects the company from having to indemnify the person in the event that he or she lied to them during the application process.
Another important part of the contract is the consideration. For insurance purposes, consideration refers to the monetary obligations of each party. The customer has to pay the premium for the policy to remain active, and in return, the insurance company has to pay the damages resulting from a claim if one should arise.
Also, the person(s) applying for insurance must have an insurable interest in whatever is being insured, whether it is a home, car, or the life of a person (as with life insurance). Insurable interest usually refers to ownership. A person must be the owner of the car or home to insure it. With life insurance, if the owner of the policy is not the same as the person whose life is to be insured, the owner must have an insurable interest (as in a financial interest) in that person and must be formally connected to the person in some manner, either as a relative, spouse, or significant other.
You should also be cognizant of the fact that insurance contracts usually contain a subrogation clause. This gives the insurance company the power to file suit against a third party if that other party was the cause of the claim. For example, if you hit a pedestrian with your car, the insurance company for the pedestrian retains the right to sue you to reimburse them for any expenses incurred by the injured party as a result of the accident.
I hope this has helped you to form an understanding of your insurance contract. Even though almost everyone has insurance, most people are not aware of some of the most important facets. You should skim through the huge packet of terms and conditions that are attached to your policy and then call your agent or broker with any questions or concerns you might have.
Insurance Policy Cancellation Letter
It’s an accepted fact. There are things in life that we have no control over. Death is one. Unless we are planning a suicide, the where, when, what and how of our life’s end are things we simply have no prior knowledge of or power over. The same is true for accidents and illness. We don’t know when they will hit us. Of these three risks, however, death is more devastating as its effect on our family’s future is permanent.
Does this mean therefore that we are completely powerless to deal with this eventuality? Not really. Granted we have no idea when death will befall us, there is something we can do to soften its blow. We can plan. We can make sure that, if and when death happens, we are ready.
This in essence is what life insurance is all about. It’s our positive response to a negative risk. For this response to be effective, however, we must be sure it is the right one.
Simply put, our life insurance policy can only guarantee our beneficiary’s future as far as we allow it to. We need to make sure therefore that we purchase one that is well suited to our needs. More importantly, we need to understand the provisions of our policy.
This is the bitter lesson Barry Norman learned too late as illustrated in the case of Avco Financial Services Realty Ltd. V. Norman, a decision of the Ontario Court of Appeals.
Barry Norman and his wife Yvonne secured a one-year second mortgage loan from Avco in 1988 and arranged for a life insurance coverage as an addendum. His belief was, should anything happen to him or his wife, the policy would serve as settlement. Things went smoothly at first. In 1989, the mortgage and insurance were renewed for another year but in 1990, Norman’s wife no longer qualified for the insurance. She had fallen ill with cancer and died the following year. When the mortgage went into default, Avco sued Barry Norman for payment of the loan. He counterclaimed for negligence, alleging Avco failed to inform him that the insurance expired with each one-year term of the mortgage and had to be renewed. The court ruled in favor of Avco. Barry Norman should have informed himself of the insurance details when he renewed it for another year.
The lesson here is crystal clear. Don’t just purchase a life insurance policy. Talk to a licensed professional and make sure you get a policy based on what you want and that you understand all its provisions. If you are a mortgage borrower, don’t sign up for life insurance from your lender. This is not their main concern. If you worry about the mortgage, then get a higher coverage that will be able to cover both the mortgage and the needs of your family. Take charge of your insurance policy. This is one aspect of your life you need to have control over.
Both Jim Pretin & Tom Takihi are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Jim Pretin has sinced written about articles on various topics from Insurance, Medicine and Homeopathic Remedies. Jim Pretin is the owner of , a service that helps programmers make email forms.. Jim Pretin's top article generates over 33100 views. to your Favourites.
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