The Good And Evil Natures Of Insurance Contracts
Most ordinary agreements are real or good faith agreements. Insurance contracts, however, are agreements “uberrimae fidei,” or agreements of the most good faith. The best amount of good faith is necessary in the negotiations preceding the issuance of the agreement. This requirement includes a long and interesting background.
In the initial days of marine insurance the contracts were entered into in sites remote control from the ships and cargoes included in the policies. It had been essential for the insurer and insured to bargain on an even of great faith above that needed in the most common commercial intercourse of your day. This requirement may be the foundation where the doctrines of guarantee, representation, and concealment are centered.
It’s been said that the very best life insurance contract is really as personal as a marriage contract. Both insured and the insurance company, in working on a plane of utmost good faith, get sucked in not merely of the contract becoming negotiated but also of the type, conduct, and credit of every other. In keeping parlance a certain little bit of home is spoken of to be insured. Actually, it’s the owner who’s insured.
The insurance contract isn’t attached to the house and will not pass with it to a fresh purchaser. The assent of the insurance company is essential to assign any agreement of insurance except a life insurance policy. The life insurance contract isn’t, strictly speaking, an individual contract; and it might be designated without the authorization of the company.
Once a reduction has happened under any agreement of property insurance, the agreement is reduced to only money state; and it becomes openly assignable as a personal debt or any additional intangible property right. Life insurance policies, however, might not be assigned following the insured has passed away unless the company approves the assignment.
The insurance contract is a contract in entirety, although this feature has been suffering from statute. Which means that, despite the fact that the thing insured is destroyed by among the hazards called in the policy (or by one not really named, for example) prior to the expiration of the policy, no part of the premium is refundable. The complete premium is gone as soon as the agreement becomes effective and the chance attaches. If for reasons uknown the chance never attaches, the complete premium is refundable.
Many examples may clarify these statements. Suppose you get a three-year fire policy on your own house for a premium of $50. Two times afterward a tornado rips through the home, leveling it. You still possess a fire policy with nearly 3 years to perform but no home to be protected.
Nevertheless, you won’t be eligible for a refund in common law. This character of insurance contracts proved so severe in program that the laws and insurance regulations of most states now require insurance companies to create refund of premiums in cases where the insured decides he no more has dependence on the policy.
The refund of a no medical life insurance premium isn’t pro rata but is a lot less. It must be noted there are a few coverages, such as for example riot and rain insurance, where the to cancel is severely limited.