The Concept and Application of Insurance Forms in a Contract
An Insurance Form can be defined as a Mutual agreement between the insurer and the insured.
It’s a known fact that insurance is a legal enforceable contract to indemnify the insured for the coverage losses as given in the policy.
The insurance policy document is the evidence of the contract of insurance, however, between insurance company issues a policy document , the insurer requires compliance of formal procedures to be followed by applicants who need insurance for their property and liability loss experience.
What is a Proposal Form
It’s a known fact that one of the prerequisite of an insurance contract is the mutual agreement between the insurer and the insured.
It is the mutual agreement between the insurer and the insured.
As such there must be a valid order and an unqualified acceptance between the two parties.
Now the proposal for insurance is also called as application for insurance, now an offer or a proposal for insurance is a request for cover and this may also be made either verbally.
Proposal for insurance
Now except in cases of a marine insurance cover where current market practices do not insist on a written proposal form, in all case, a proposal for granted of a cover, either for life business or for general business, must be evidenced by a written document.
It is the duty of an insurer to furnish it to the insured free of charge, written 30 days of three acceptance of a proposal.
- Where a proposal form is not used: The insurer shall record the information in its cover note or policy.
The Onus of Proof often times shall rest with the insurer claims that the purposer suppress any material information or provided misleading or false information on any matter materials to the grant of a cover.
This can also be in writing or by the completion of a printed proposal form supplied by the insurer, so proposal has to be in writing or contained in writing and can not be oral alone.
These proposals are called as applicant for insurance in USA, and the Britishers call it proposal form.
which ever term one decides to call it, one thing’s for certain that one who seeks cover is the proposer.
The proposer must have a property, which may be at risk or he or she may have dependants who will suffer financial loss at his or her death.
Now General Insurance deals with property and liability risks (also business-personal accident and Heath insurance) from some events the organizers of the event or the owners of a property or a contractor or a situation may incur a legal liability to others from injury to them.
These others are called third parties because the two parties to contract of insurance are the insured and insurer.
The sector of cover or protection must furnish accurate and truthful answers to the many questions contained in the proposal form.
The proposal form will be similar to most property risk, but may differ depending in certain special adverse features of the risks.
Some of the material facts disclosed in a proposal form
Some common questions which occur in all proposal forms and also particular question, which relate to specific risk.
A typical property insurance proposal form will, inter all, including the following common information, which is sought:
- Name, address, telephone number and other personal identifications
- The Situation of the property
- Proposed Profession
- Previous and present insurance
- Loss experience
- Sum insured
- The contents on the promise in the location
- The type of protection available
- The proportion of ownership of others in the property at risk
In other words, specifying the interest of mortgage like banks or lesses, the nature of adjusting risk, say what are the factors which are the applicants immediate neighbours doings.
The value at risk or the sum proposed for insurance or as is generally known as sum insured, the proposal from generally ends with a declaration to be signed by the proposed, in this the proposer must declare that whatever information he states in the proposal must be true to the best of his or her knowledge.
Such a declaration becomes the basis of the insurance contract, every proposal form must also be dated
Proposal for Non-Insurance
There is no requirement for proposal from in cases of marine insurance, in UK, the broker under the instructions of the proposer, fills up a ship, mentioning all the basis essentials needed for assessing the risk proposed.
The clause identifying the liabilities of the underwriter are also included in the slip. In some countries, the proposer himself has to approach the insurer.
The General Insurance industry is capable of underwriting the entire risk. However big of money be and re insured any part of it.
It had to be approached through agents licensed by the controller of insurance.
Now of course, the authority to issue license lies with the agencies and those agencies are also allowed private insurers to obtain license for the agents.
What are Cover Notes
A Cover note is an evidence of insurance, it is as good as an insurance policy, a cover note is a temporary and limited agreement, sent prior to the completion of the proposal (preparation of the policy document, pending some information to the filled or when the proposal is under consideration or the policy is being prepared for delivery, it is usually serves as an interim clause with the same terms and conditions that are generally issued for such proposals.
It automatically expires at the end of the declared period, it also expired if the regular policy is issued or declined by the insurer.
As such any claims arising during the period for which the cover note remains valid will be determined by the terms of the note and not by the terms of the policy.
Subsequent to it, where the insurer sends a temporary cover, limiting the renewal of the insurance on its expiry, it becomes enforceable if accepted by the insurer or else it remains as an offer waiting for an acceptance.
Some insurers charge a normal fee for the insured of cover notes, in fact there will be a statement in the cover note that this is issued subject to the terms and conditions of insurance policy to be used.
This cover rate is different from premium, which is the consideration for the contract of insurance.
Some of the circumstances when cover notes are issued are when negotiations for insurance are in progress and it is necessary to provide cover on a provisional basis or when the premise are being inspected for determining the actual rate applicable.
Also read: Concept and Principles of an Insurance Policy
The cover note is not stable but represented the same insurance as that provided by the policy, the cover is not subject to the usual terms and conditions of the insurers policy for the class of insurance insured. It is also subject to any special clause if applicable.
