What is an Insurance Policy?
An insurance policy is the evidence of a contract between an insured and an insurer. When a client submits an application and an insurer accepts it the five basic requirements for a legal contract must be fulfilled. Because of the very nature of insurance, there are three additional requirements to be met before a legally binding contract of insurance exists. The law demands the presence of:
- Insurance interest
- A risk and a promise of indemnity
- Utmost good faith
Once the client has fulfilled the above criteria to the satisfaction of the insurer than client becomes the insured party and the contract is legally binding between both parties.
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