Principles of a Building Insurance Contract
Introduction - most of us affect
home building insurance without a
second thought, but what are the mechanics of this process, indeed not just of
building insurance but of insurance contracts in general. An agreement between
two separate parties that is intended to be legally binding is known as a
contract. For a contract to be effected, one party has to make an offer which
another party has to accept with equal terms. In the case of insurance, an
individual or company approaches an insurer with a wish to affect insurance say
against their building burning down. The insurance company will ask for in
formation relating to the risk and then will offer the person a quotation. If
the quotation is accepted, then a contract will exist. The quotation should
include amongst other things the following information:-
The premium that is payable
The amount of taxation
Any additional fees payable
How long the quotation is valid for
The name of the insurance company
A Key facts document outlining all the
salient information pertaining to the insurance.
The prospective policyholder
uses this information to make an informed decision as to the suitability of an
insurance contract. If buying a product form a broker that offers “Advice”, the
quotation should also come with a recommendation. Once the person has accepted
the cover, the insurance company will consider themselves on risk. In practice
is always advisable for policyholders to obtain writing confirmation of cover
before they consider themselves to be insured Mistakes are made with verbal
agreements and we advise that you should not consider yourself on cover until
such time as you have received confirmation in writing.
Utmost Good Faith - to arrive at
this point where a contract of insurance exists, the insurers rely on the
principle of utmost good faith. All insurance contracts should be entered in to
free from fraud and fraudulent intent. The purchaser should therefore tell the
insurance company all of the relevant underwriting information and not withhold
any information which is likely to alter the insurer’s assessment of the risk
proposal. The term to describe important information is known as material facts.
Mostly, questions on the proposal form will be sufficient to give the insurance
company a true picture of the risk presented (providing of course that the
policyholder has told the truth.) However, not even the widest form of proposal
form can ask every question and it is the policyholder’s duty to disclose any
additional information that the insurance company might deem to be relevant.
This may all seem a little grey but in effect in all works quite well,
policyholders that are in any doubt as to what constitutes a material fact
should always consult with their insurance company or broker. Failure to
disclose a material fact could result in a claim being declined In return, the
insurance company must present the policyholder with a policy document and let
him know all of the relevant terms and conditions and warranties.
Insurable Interest - the above term
relates to your legal right to obtain insurance. Usually this right exits
because of your ownership of an object. In the case of a building or your home
contents, you own the items so you have a right to insure them. Sometimes the
right exists on goods that you have borrowed or have rented although in this
instances, often a contract is often offered stating where the responsibility
for insurance rests ( The case of rented Electrical equipment is a good
example.)
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Copyright Assetsure Limited
2007
