Requirements of an Insurance Contract
An insurance policy is based on the law of contracts. To be legally enforceable, an insurance contract must meet four basic requirements: offer and acceptance, exchange of consideration, competent parties, and legal purpose.
Offer and Acceptance
The first requirement of a binding insurance contract is that there must be an offer and acceptance of its terms. In most cases, the applicant for insurance makes the offer, and the company accepts or rejects the offer. An agent merely solicits or invites the prospective insured to make an offer. The requirement of offer and acceptance can be examined in greater detail by making a careful distinction between property and casualty insurance, and life insurance.
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