Chapter 2. The Insurance Contract

Terms you'll need to understand:

  • Indemnity

  • Aleatory contract

  • Contract of adhesion

  • Unilateral contract

  • Declarations

  • Insuring agreement

  • Conditions

  • Exclusions

Concepts you'll need to master:

  • Competent parties

  • Legal purpose

  • Offer and acceptance

  • Consideration

  • Utmost good faith

A contract is a legal agreement between two or more competent parties that promises a certain performance in exchange for a certain consideration. When an insurance company agrees to pay for an insured's losses in exchange for a certain premium, the two parties have entered into a contract. Although a contract of insurance can be oral, it is usually written in the form of an insurance policy.

Elements of a Valid Contract

Insurance contracts, like all other contracts, ...

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