For many people, the words “insurance policy” and “insurance contract” can be used interchangeably. But not only do insurance contracts have well-established definitions — they come with their own set of contractual obligations.
What exactly is an insurance contract and how does it work? Keep reading to find out.
What Is an Insurance Contract?
In basic terms, an insurance contract is a legally binding agreement between the insurance provider and the person who’s taking out insurance.
Insurance contracts will often have the basic components of a standard contract in the form of offers, acceptance, and consideration. But they’ll also have industry-specific rules that require policyholders to have both an insurable interest and a legal reason for having the policy.
If it all sounds complicated, you don’t have to worry, however. Many aspects of the insurance contract, like paying your premiums or being old enough to enter a contract, will often be met naturally through the standard insurance acquisition process.
What Does It Mean to Have an Insurance Contract?
We’ve just covered the basics of insurance contracts, but none of that answers the basic question of what the contract means for you. Here’s how insurance contracts tend to affect the major players involved in insurance policy purchases:
1. The Broker
Your broker essentially functions as a middleman between you and your insurance provider. Because your broker doesn’t actually issue or sign up for insurance, they aren’t a party to the contract. This in part allows your broker to give you objective insurance advice.
2. Insurance Carrier
When your insurance provider decides to extend a policy to you, they’re not just helping you get your car on the road — they’re subjecting themselves to multiple legal obligations. For instance, if you’re accused of negligence and you’ve got the correct insurance coverage, your carrier may be legally required to finance your defence or pay your settlement costs. In Ontario, the carrier is considered a party to the insurance contract.
3. The Customer
If you’re reading this, you more than likely fall under this category. As the policyholder, you’re the other party to the insurance contract. Misreading your terms or skipping payments can affect your coverage options, your premiums, and even your expected payout.
To that end, here are our top insurance contract tips:
- Make sure the information in your insurance application form is accurate
- Review your policy on a quarterly or annual basis
- Ask your broker or agent about your insurance options
Need Insurance? Contact Oracle RMS!
As a company, we’re committed to making sure that our clients get insurance contracts that are fair, robust, and affordable. Whether you’re looking for auto insurance or business insurance, our team does it all.
Contact Oracle RMS today.