All parties must have the necessary capacity to enter into the contract
Legal Purposes/Object
Insurance contracts can't be written to cover an illegal activity or immoral purposes
Offer and Acceptance
Applicant completes an application for coverage and the insurance company eithe raccepts it and returns a policy or binder, or makes a counter-offer
Consideration
Something that has value in the eyes of the law in which a promisee receives something in return for a promise i.e. paying premiums so the insurance company will cover future loss
Aleatory
Payment will only begin if a loss occurs
Contract of Adhesion
Insured must accept the insurance company's policy as it is written
Exeutory
Both sides must perform certain acts to make the contract legally enforceable
Conditional
Promises action in the event of a future occurrence
Utmost Good Faith
Both parties bargain in good faith
Personal Aspect
Insurance contract is bound to the insurable interest of the insured i.e. if insured property is sold, policy doesn't transfer to new owner
Principle of Indemnity
Contract must restore the insured to the financial position previously held before the loss
Valued Contract
Pays stated amount in the event of a claim
Reimbursement Contract
Pays only the amount of the loss
Unilateral
Only the insurance company is legally bound to perform its part of the agreement
Breach of Warranty
An incorrect statement made by the insured that may void coverage
Misrepresentation
Untrue statements made by the insured that may void coverage
Concealment
Failure of the insured to reveal relevent facts known to the insured when applying for insurance that may void coverage
Fraud
intentional act designed to deceive and induce another party to part with something of value
Warranty
Something that becomes part of the contract and is a statement that is considered to be a guarantee
Reasonable Expectations
Policies include coverage that an average person would reasonably expect it to include
Waiver
Voluntary or intentional relinquishment of a known right. Expressed waivers are purposefully given up, implied waivers may be the result of some kind of negligence
Estoppel
Someone intentionally or unintentionally creates the impression that a certain fact exists and another person relies on that information and is damaged as a result. Guilty party may be legally prohibited (estopped) from asserting that fact