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It is almost mandatory for people to opt for various types of insurance policies nowadays. While the scope and coverage of an insurance policy depends on aspects like your requirements, income status, number of family members etc, there are a few basic guidelines you should adhere to. This will ensure you get the right and apt policy and invest in the right place. It is particularly important that you read nuances of insurance contract before finalizing a policy. There can be loopholes that can evade your eyes if you are careless on this aspect.
Basics of an Insurance Contract
The proposal form
When you apply for any insurance policy, whether car or home insurance, you are required to fill in a proposal form. It can be a paper based form as well as an online form. In either case, filling up the form carefully is a prerequisite. Ensure that you read each category well before filling up the fields. In some situations, the provider company may make some modifications before clearing the policy, especially premiums and riders.
Legal capacity
Ensure that you are in a legal position to opt for a particular insurance policy. In case you are not in the right age group or mentally unstable, some policies may not be suited for your needs. A veteran insurance company will inform you in such instances as well.
Think of the Value in Indemnity contracts
As a matter of fact, a majority of insurance policies are basically indemnity contracts. Indemnity contracts mean the loss you suffer can be measured in monetary terms while making the claim. Insurers typically pay you the amount that you have lost in an accident or after suffering from an illness. If you lose a hatchback in an accident, they will pay you the money required to buy a similar model, not a premium category sedan.
However, you have to keep in mind that all insurance policies are not necessarily indemnity contracts. For example, Life insurance contracts as well as personal accident insurance policies are non-indemnity contracts.
Principle of Subrogation
Subrogation enables an insurance company to sue a person or entity that has caused damage or property loss to the insured person or entity by any means. This helps the insurer get back some money. For instance, if you lose your car in a road accident owing to the fault of another driver, the insurer will pay you the due money. However, they may sue the responsible person to get back some of the money they had to pay you.
Doctrine of Utmost Good Faith
When you opt for an insurance policy, especially health coverage plans, the insurer issues you the policy on doctrine of utmost good faith. This means the policy is being issued to you based on information provided by you. You are supposed to mention past ailments or recurring diseases when buying a health insurance policy. Or else, the insurer may not pay you the whole amount when you make a claim later post an illness.
Doctrine of Adhesion
As per doctrine of adhesion, you are required to accept total insurance contract with its terms and exclusions. Once you sign the contract and pay the amount, it will result in the insurer becoming liable to pay you the due as per the terms mentioned in the policy.
Summing it up
No insurance policy can be called perfect, even if it is a very expensive policy. Look for the exclusions and areas not covered by a policy before you make the payment. Compare similar policies online side by side beforehand to be on safe side.
This article is contributed by Evans who is associated with GroupChesterfield that offers insurance for contractors.