An insurance contract is a document that contains the agreement reached between an insurance company and a client. Through the contract, the insurance company, in exchange for the payment of a premium by the client, undertakes to offer coverage for the risks established in said contract, as well as to compensate the client for damages, within the established.
An insurance contract, therefore, is nothing more than a contract that includes the agreement reached between an insurance company and a potential client. Given that the client needs insurance to cover a possible risk, and the insurance company offers what it demands, the agreement is formalized through the insurance contract.
In this insurance contract, in addition to the personal data of the client or the company and the tax data of the insurer, there are details of the agreement, the coverage offered by the insurer, the price and the payment terms of the premium that The client must satisfy for the insurance to be in force, as well as other data of interest, such as compensation in case the risk occurs and, therefore, there are consequences in terms of damages for the insured.
In short, the insurance contract is nothing more than a document that contains the agreement reached between the insurer and the client. By means of this contract, the insurance company undertakes to offer coverage for the risks insured by the policyholder, while the policyholder undertakes, in order to have that coverage, to satisfy the payment of a periodic premium.
Characteristics of the insurance contract
As a summary, let’s see the main characteristics to finish understanding this concept well:
- It is a document issued by the insurance company. This, after having reached an agreement with a client.
- The document contains the details of the insurance company and the policyholder.
- Likewise, it also includes the coverage offered by the insurer, the premium that the policyholder must pay, as well as the corresponding compensation for each damage that occurs.
- Through the insurance contract, the agreement is formalized and the policy is issued.
- The insurance contract, therefore, includes the obligations and rights that both parties have after the agreement reached.
Difference between insurance contract and policy
Before continuing, let’s see what the difference is between a contract and a policy.
Thus, as we said, an insurance contract is a document that includes the agreement reached between an insurance company and a client. This document must be signed by the policyholder, the insured if different from the policyholder, and the insurance company. Likewise, it is the document by which the relationship between the two parties is established.
On the other hand, the policy is the document through which insurance contracts are formalized. In this sense, it is a document that is generated when an agreement has been reached between the insurer and the policyholder, signing the insurance contract.
Therefore, the insurance contract, when signed, establishes the relationship and the details of said relationship between the client and the insurance company. Likewise, once this agreement is reached, the policy is issued, this policy being a document that collects, as a summary and to record, the agreement reached between both parties, as well as the rights and obligations that, for both parties, listed in the insurance contract.
Elements of the insurance contract
For an insurance contract to be formalized, we must know that the following elements must be present:
- Policyholder : It is the person who contracts the insurance and, therefore, signs the contract. This assumes the rights and obligations that this implies, committing to pay the premium.
- Insured : It is the person, the property or, in general, the object of the insurance. That is, what we want to ensure. The sinister falls on him.
- Beneficiary : He is the one who receives the compensation and, therefore, the repair of the damage from the insurer. The beneficiary can be the policyholder or a third party.
- Insurance entity : It is the company that offers the coverage and, therefore, undertakes to repair the damage in the event of an accident. Therefore, the insurer charges premiums to its policyholders.
Insurance contract law
Finally, it should be noted that the law governing insurance contracts is the law of the insurance contract.
This law establishes everything related to the rights and obligations of the elements that make up the insurance, while establishing the limits on everything that, previously, has not been discussed between the entity and the policyholder.
It should be noted that this law varies depending on the country to which we refer.