Английский язык для юристов. Предпринимательское право
Шрифт:
Insurance policies, like other contracts, require offer, acceptance, mutual assent, capable parties, consideration, and legally valid subject matter. For either type of insurance to be effective, the beneficiary (a person or business applying for insurance) must have an insurable interest in the person or property insured (i.e. the subject matter of the policy).
An insurable interest is the financial interest that a policyholder has in the person or property that is insured. In general, an insurable interest will exist if the insured has a financial interest in the insured person or property. The nature and duration of insurable interests vary with the type of insurance purchased.
An individual has an insurable interest in the life of another if a financial loss will occur if the insured dies. An insurable interest exists if the person who buys the insurance is dependent on the insured for education, support, business (partners), or debt collection. A life insurance policy will remain valid and enforceable even if the insurable interest terminates. It is necessary only that the insurable interest exists at the time the policy was issued.
To establish the existence of an insurable interest in property, the insured must demonstrate a monetary interest in the property. This monetary interest means that the insured will suffer a financial loss if the property is damaged or destroyed. Unlike life insurance, this insurable interest must exist when the loss occurs.
Life insurance policies have many optional provisions that may be purchased by the insured. Three popular options are double indemnity, waiver of premium, and guaranteed insurability.
For an additional premium, the insured may purchase a benefit known as double indemnity, or accidental death benefit. This option provides that if the insured dies from accidental causes the insurer will pay double the amount of the policy to the beneficiary.
The waiver-of-premium option excuses the insured from paying premiums if he or she becomes disabled.
A guaranteed-insurability option allows the insured to pay an extra premium initially in exchange for a guaranteed option to buy more insurance at certain specified times later on.
Property insurance can be purchased to protect both real and personal property. Some property insurance policies protect the insured against a specific danger, as in the case of fire insurance. Other policies are designed to protect certain items of property against a variety of losses. Such is the case with fire, homeowner's, and automobile insurance.
The first step in obtaining an insurance policy is to fill in an application. The application is an offer made by the applicant to the insurance company. As with any offer, the offeree, in this case the insurance company, may accept or reject the offer.
The waiting period between the offer and the acceptance opens the insured to potential risk. To avoid this risk, the insured can arrange to have the insurer issue a binder. A binder, or binding slip, will provide temporary insurance coverage until the policy is formally accepted. The binder will include all of the usual terms that would be included in the actual policy to be issued.
An insurance contract differs from most other contracts in that it requires the payment of premiums. The amount of the premium is determined by the nature and character of the risk and by how likely the risk is to occur. The premium increases as the chance of loss increases.
When the insured stops paying premiums, an insurance contract is said to lapse. This does not mean, however, that the contract will terminate automatically on the date that the last premium is paid. It will also not lapse automatically if the insured makes a delayed payment. Most contracts allow for a grace period of 30 or 31 days in which the insured may make payments to keep the policy in force. Beyond this period, however, the insurance contract will lapse and the policy will terminate.
Under certain conditions, the insurer is given a legal right to forfeit, or cancel, an insurance policy. Proof of a forfeiture permits cancellation either before a loss or at the time the claim is made on a policy. Among grounds permitting forfeiture are the breach of warranty and the concealment or misrepresentation of a material fact by the insured. Neither the insured nor the insurer may deny statements or acts previously made or committed that might affect the validity of the policy.
A warranty is an insured's promise to abide by restrictions, especially those written into a policy. An insurance company has the burden of proof in establishing that a warranty has been breached (broken) by the insured. If this is proved, the insurer may cancel the contract or refuse payment of loss to the insured or to a beneficiary.
Fraudulent concealment is any intentional withholding of a fact that would be of material importance to the insurer's decision to issue a policy. The applicant need only give answers to questions asked. However, the insured may not conceal facts that would be material in acceptance of a risk.
If an insured party gives false answers, or misrepresentations, to questions in an insurance application that materially affect the risk undertaken by the insurer, the contract is voidable by the insurer.
An insurer may not deny acts, statements, or promises that are relevant and material to the validity of an insurance contract. This bar to denial is called an estoppel. When an insurer has given up the right to cancel a policy under certain circumstances by granting the insured a special dispensation, the insurer cannot deny that dispensation when the chance to cancel or deny liability arises.
When the insurance company gives up one of its rights in order to help the insured, the company has made a waiver. A waiver, which is actually a form of estoppel, can be implied from the conduct of the insurance company. For example, when an insurance company cashes the check of a lapsed policy, it has, in effect, given up or waived its right to cancel that policy. Once a right has been waived, the insurer may not later deny its waiver.
Exercise 1. Comprehension questions: