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Harvard Law Review Vol. 83, No. 6 (Apr., 1970) , pp. 1281-1322 (42 pages) Published By: The Harvard Law Review Association https://doi.org/10.2307/1339816 https://www.jstor.org/stable/1339816 Read and download Log in through your school or library Subscribe to JPASS Unlimited reading + 10 downloads Monthly Plan
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Abstract In part one of this article, which appeared last month, Professor Keeton discussed three principles that pervade judicial and legislative doctrines establishing rights outside the terms of insurance contracts in insureds and other claimants. In this part, the discussion focuses on ways in which courts and legislatures have ameliorated the common law's rigorous enforcement of the precise terms of "warranties" in insurance policies. He concludes by suggesting that the courts' current practice of strictly enforcing "coverage" clauses might require similar amelioration. Journal Information The Harvard Law Review publishes articles by professors, judges, and practitioners and solicits reviews of important recent books from recognized experts. Each issue also contains pieces by student editors. Published monthly from November through June, the Review has roughly 2,000 pages per volume. All articles--even those by the most respected authorities--are subjected to a rigorous editorial process designed to sharpen and strengthen substance and tone. The November issue contains the Supreme Court Foreword (usually by a prominent constitutional scholar), the faculty Case Comment, twenty-five Case Notes (analyses by third-year students of the most important decisions of the previous Supreme Court Term), and a compilation of Court statistics. The February issue features the annual Developments in the Law project, an in-depth treatment of an important area of the law. Publisher Information Founded in 1887 by future Supreme Court Justice Louis D. Brandeis, the Harvard Law Review is an entirely student-edited journal that is formally independent of the Harvard Law School. Approximately ninety student editors make all editorial and organizational decisions and, together with a professional business staff of four, carry out day-to-day operations. Aside from serving as an important academic forum for legal scholarship, the Review is designed to be an effective research tool for practicing lawyers and students of the law. The Review also provides opportunities for its members to develop their own editing and writing skills. All student writing is unsigned, reflecting the fact that many members of the Review, in addition to the author and supervising editor, make a contribution to each published piece. Rights & Usage This item is part of a JSTOR Collection. There are certain types of insurance most people need to have. For example, if you own a home then homeowner's insurance may be standard. Auto insurance covers your vehicle while life insurance protects you and your loved ones in a worst-case scenario. When your insurer gives you the policy document, it's important to read through it carefully to make sure you understand it. Your insurance advisor is always there for you to help you with the tricky terms in the insurance forms, but you should also know for yourself what your contract says. In this article, we'll make reading your insurance contract easy, so you understand their basic principles and how they are put to use in daily life. Key Takeaways
Insurance Contract EssentialsWhen reviewing an insurance contract, there are certain things included that are typically universal.
ImportantYou may not want to sign an insurance contract if you don't fully understand the terms without first consulting an insurance expert. Contract ValuesThis section of an insurance contract specifies what the insurance company may pay out to you for an eligible claim, as well as what you may pay to the insurer for a deductible. How these sections of an insurance contract are structured often depends on whether you have an indemnity or non-indemnity policy. Indemnity ContractsMost insurance contracts are indemnity contracts. Indemnity contracts apply to insurances where the loss suffered can be measured in terms of money.
(To read more on indemnity contracts, see "Shopping for Car Insurance" and "How Does the 80% Rule for Home Insurance Work?") There are some additional factors of your insurance contract that create situations in which the full value of an insured asset is not remunerated.
Non-Indemnity ContractsLife insurance contracts and most personal accident insurance contracts are non-indemnity contracts. You may purchase a life insurance policy of $1 million, but that does not imply that your life's value is equal to this dollar amount. Because you can't calculate your life's net worth and fix a price on it, an indemnity contract does not apply. A life insurance contract typically includes the following:
When you've determined that life insurance is something you need, it's important to compare the options carefully. For example, you may lean toward term life insurance versus permanent life insurance if you don't need lifetime coverage. Or you may prefer permanent coverage if you're treating life insurance like an investment. In either scenario, it's important to shop around to find the best life insurance companies. (For more information on non-indemnity contracts, read "Buying Life Insurance: Term Versus Permanent" and "Shifting Life Insurance Ownership.") Insurable InterestIt is your legal right to insure any type of property or any event that may cause financial loss or create legal liability for you. This is called insurable interest. Suppose you are living in your uncle's house, and you apply for homeowners insurance because you believe that you may inherit the house later. Insurers will decline your offer because you are not the owner of the house and, therefore, you do not stand to suffer financially in the event of a loss. When it comes to insurance, it is not the house, car or machinery that is insured. Rather, it is the monetary interest in that house, car or machinery to which your policy applies. It is also the principle of insurable interest that allows married couples to take out insurance policies on each other's lives, on the principle that one may suffer financially if the spouse dies. Insurable interest also exists in some business arrangements, as seen between a creditor and debtor, between business partners or between employers and employees. TipIn life insurance contracts, someone with an insurable interest can include your spouse, your children or grandchildren, a special needs adult who is also a dependent or aging parents. Principle of SubrogationSubrogation allows an insurer to sue a third party that has caused a loss to the insured and pursues all methods of getting back some of the money that it has paid to the insured as a result of the loss. For example, if you are injured in a road accident that is caused by the reckless driving of another party, you will be compensated by your insurer. However, your insurance company may also sue the reckless driver in an attempt to recover that money. The Doctrine of Good FaithAll insurance contracts are based on the concept of uberrima fides, or the doctrine of utmost good faith. This doctrine emphasizes the presence of mutual faith between the insured and the insurer. In simple terms, while applying for insurance, it becomes your duty to disclose your relevant facts and information truthfully to the insurer. Likewise, the insurer cannot hide information about the insurance coverage that is being sold.
Depending on their nature, these statements may either be representations or warranties. A) Representations: These are the written statements made by you on your application form, which represent the proposed risk to the insurance company. For instance, on a life insurance application form, information about your age, details of family history, occupation, etc. are the representations that should be true in every respect. Breach of representations occurs only when you give false information (for example, your age) in important statements. However, the contract may or may not be void depending on the type of the misrepresentation that occurs B) Warranties: Warranties in insurance contracts are different from those of ordinary commercial contracts. They are imposed by the insurer to ensure that the risk remains the same throughout the policy and does not increase. For example, in auto insurance, if you lend your car to a friend who doesn't have a license and that friend is involved in an accident, your insurer may consider it a breach of warranty because it wasn't informed about this alteration. As a result, your claim could be rejected. As we've already mentioned, insurance works on the principle of mutual trust. It is your responsibility to disclose all the relevant facts to your insurer. Normally, a breach of the principle of utmost good faith arises when you, whether deliberately or accidentally, fail to divulge these important facts. There are two kinds of non-disclosure:
For example, suppose that you are unaware that your grandfather died from cancer and, therefore, you did not disclose this material fact in the family history questionnaire when applying for life insurance; this is innocent non-disclosure. However, if you knew about this material fact and purposely held it back from the insurer, you are guilty of fraudulent non-disclosure. When you supply inaccurate information with the intention to deceive, your insurance contract becomes void.
Other Policy AspectsThe Doctrine of Adhesion. The doctrine of adhesion states that you must accept the entire insurance contract and all of its terms and conditions without bargaining. Because the insured has no opportunity to change the terms, any ambiguities in the contract will be interpreted in their favor. Principle of Waiver and Estoppel. A waiver is a voluntary surrender of a known right. Estoppel prevents a person from asserting those rights because they have acted in such a way as to deny interest in preserving those rights. Presume that you fail to disclose some information in the insurance proposal form. Your insurer doesn't request that information and issues the insurance policy. This is a waiver. In the future, when a claim arises, your insurer cannot question the contract on the basis of non-disclosure. This is estoppel. For this reason, your insurer will have to pay the claim. Endorsements are normally used when the terms of insurance contracts are to be altered. They could also be issued to add specific conditions to the policy. Co-insurance refers to the sharing of insurance by two or more insurance companies in an agreed proportion. For the insurance of a large shopping mall, for example, the risk is very high. Therefore, the insurance company may choose to involve two or more insurers to share the risk. Coinsurance can also exist between you and your insurance company. This provision is quite popular in medical insurance, in which you and the insurance company decide to share the covered costs in the ratio of 20:80. Therefore, during the claim, your insurer will pay 80% of the covered loss while you shell out the remaining 20%. Reinsurance occurs when your insurer "sells" some of your coverage to another insurance company. Suppose you are a famous rock star and you want your voice to be insured for $50 million. Your offer is accepted by the Insurance Company A. However, Insurance Company A is unable to retain the entire risk, so it passes part of this risk—let's say $40 million—to Insurance Company B. Should you lose your singing voice, you will receive $50 million from insurer A ($10 million + $40 million) with insurer B contributing the reinsured amount ($40 million) to insurer A. This practice is known as reinsurance. Generally, reinsurance is practiced to a much greater extent by general insurers than life insurers. The Bottom LineWhen applying for insurance, you will find a huge range of insurance products available in the market. If you have an insurance advisor or broker, they can shop around and make sure that you are getting adequate insurance coverage for your money. Even so, a little understanding of insurance contracts can go a long way in making sure that your advisor's recommendations are on track. Furthermore, there may be times when your claim is canceled because you didn't pay attention to certain information requested by your insurance company. In this case, a lack of knowledge and carelessness can cost you a lot. Go through your insurer's policy features instead of signing them without delving into the fine print. If you understand what you're reading, you'll be able to ensure that the insurance product that you are signing up for will cover you when you need it most. Which provision of a life insurance policy states that the application is part of the contract?What provision in a life insurance policy states that the application is considered part of the contract? The Entire Contract provision, found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract.
Is the application part of the insurance contract?The application is defined as a "form supplied by the insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant. It is signed by the applicant and is part of the insurance policy if it is issued.
What are the provisions in life insurance contract?These are: Grace period: the time in which the insured has past the due date to pay the premium before the policy lapses. Policy reinstatement: period of time in which the insured can pay past due premiums and resume the same policy. Policy loan provision: the amount the insured can borrow against a policy's cash value.
What type of contract is contract of life insurance?It is a contract of indemnity. Claim payment Insurable amount is paid, either on the occurrence of the event, or on maturity. Loss is reimbursed, or liability incurred will be repaid on the occurrence of uncertain event.
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