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There are certain types of insurance most people need to have. For example, if you own a home then homeowner’s insurance may be standard. Auto insurance covers your vehicle while life insurance protects you and your loved ones in a worst-case scenario.

When your insurer gives you the policy document, it’s important to read through it carefully to make sure you understand it. Your insurance advisor is always there for you to help you with the tricky terms in the insurance forms, but you should also know for yourself what your contract says. In this article, we’ll make reading your insurance contract easy, so you understand their basic principles and how they are put to use in daily life.
Key Takeaways

Insurance Contract Essentials

When reviewing an insurance contract, there are certain things included that are typically universal.
Offer and Acceptance. When applying for insurance, the first thing you do is get the proposal form of a particular insurance company. After filling in the requested details, you send the form to the company.
Consideration. This is the premium or the future premiums that you have to pay to your insurance company. For insurers, consideration also refers to the money paid out to you should you file an insurance claim. This means that each party to the contract must provide some value to the relationship.
Legal Capacity. You need to be legally competent to enter into an agreement with your insurer. If you are a minor or are mentally ill, for example, then you may not be qualified to make contracts. Similarly, insurers are considered to be competent if they are licensed under the prevailing regulations that govern them.
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