The insurance contract states that the insurer will pay the insured (the policy holder) with certain benefits if any events occurred defined in the policy. Here, the event has to be uncertain. With the term ‘uncertain’ it means uncertainly about the time or type of the incident.
The insurance policies are generally the contracts of adhesion, as the policy holder can make no change to it and the insurer draws up the contract. This can be interpreted as the insurer bears the burden if there are any kinds of problem with the terms of the policy. Most of the insurance policies are sold without the policy holder having checked the copy of contract. Reading the terms and conditions of the insurance policy is of utmost importance, even if you have blind faith on your insurance agent (the one who sells the insurance policies).
The amount exchanged by the insurer and the insured are quite unequal and depends completely upon the future events. However, it is a very important point you will notice in the non-insurance contracts, where the amount exchanged by both the parties are roughly equal. Experts are in favor of saying that insurance contracts are highly unilateral. The insurer makes promises that are legally enforceable. The insurer is compelled to pay the benefits as mentioned in the contract if the insurer has paid the premiums and met the basic provisions.
Insurance contracts are majorly governed by the principle of good faith, which involves both the parties of the insurance contract to deal in good faith. The norms of the insurance are so strict in some parts of the world, that even the insured can sue the insurer if the insurer acts in bad faith. It is better if the insured discloses all the material facts that have a close relevance with the risk for which the insurance policy holder is seeking insurance coverage.
Things You Should Know About Insurance Policies Before Selecting One
General features of the insurance policy
Structure of the standard insurance policy