The Insurance Agreement

Insurance policies are legal contracts. While they seem very complex, a basic understanding of common insurance terms can make them much more understandable. If you have any questions, an attorney with experience in insurance law can be an excellent resource.

All insurance policies must meet the requirements of contract law. This means that most legal disagreements over an insurance policy can be settled using the procedures of contract law. Policies contain clauses which define the agreement and any exclusions or limitations. The policy will lay out the definition of losses, and the details regarding proof and payment. It will define the amount of money the insured party must pay in premiums, and the amount of coverage provided by the insurance company.

"Exclusions" define circumstances or losses which the policy does not cover. An example would be an exclusion for losses caused by an intentional act by the insured. "Limitations" are provisions which limit coverage under certain circumstances or time periods. For example, many health insurance policies limit coverage for pre-existing conditions, or conditions which began or were diagnosed before the insurance policy was issued.

Insured parties must have an "insurable interest" in the losses covered by the policy. This means that the contract is void if, for example, the insured does not own property covered by the insurance policy.

Again, an attorney is the best resource for any questions about a policy or its language.