Forums » Life Insurance
Contracts In Insurance
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Contract:
A contract is a legally enforceable agreement between two or more parties.
The two parties to an individual life or health insurance contract are the insurance company that
issued the policy and the individual who purchased the policy.
Types of Contract:
Formal and Informal Contracts:A formal contract is one that is enforceable because the parties to the contract met certain
formalities concerning the form of the agreement.
An informal contract is a contract that is enforceable because the parties to the contract met
requirements concerning the substance of the agreement rather than requirements concerning
the form of the agreement.
Life and health insurance contracts typically are expressed in written form for two reasons:
a) Putting the contract in writing helps prevent misunderstandings between the parties as to
the terms of their agreement.
b) A written contract provides a permanent record of the agreement.
Bilateral and Unilateral Contracts:A bilateral contract is a contract when both parties make legally enforceable promises when
they enter into the contract.
A unilateral contract is a contract when only one party makes legally enforceable promises when
the parties enter into the contract.
A policy owner has the right to stop paying premiums and cancel the policy at any time. Because
only the insurer can be legally held to its promises, life and health insurance contracts are
unilateral contracts.