Frankly I’m amazed!
We keep getting tons of questions about insurance law, and specifically – how is it possible that a beneficiary nomination on my life insurance policy can override the wishes of my will?
Since there’s such a lot of interest in the subject I thought we should discuss the more important facets in greater detail. What do you think?
We all know that you buy insurance to protect yourself against one or other financial risk.
Whether it be the risk of damage to your car or the debts you leave behind when you die.
Your insurance company then buys your risks in exchange for a payment. The more people whose risks they can purchase the better since it allows them to spread the risk amongst a group of people.
The large amount of payments coming in is used to offset the risks AND provide them with a tidy profit.
But what makes up an insurance contract?
Here’s the legal definition of an insurance contract:
“It is a contract between an insurer and an insured whereby the insurer undertakes in return for the payment of a premium to render to the insured a sum of money on the happening of a specified uncertain event in which the insured has some interest.”
As I’ve mentioned before insurance falls under the common law and the law of contract since it’s an insurance contract between two parties.
For a contract to be valid and enforceable the following must exist:
- There must be an insured party who is prepared to pay a premium
- There must be an insurer who is willing to pay an amount to the insured upon the happening of a specified event
- There must be an actual risk which is being insured against (or else the insurer will never need to pay a claim!)
- There must be a Rand value attached to the risk which is being insured against
- The insured must have an insurable interest in the risk (I can’t insure your car – or your life for that matter!)
In our follow-up to this we’ll discuss the parties involved in an insurance contract. This is where all the confusion seems to be coming in…You won’t want to miss our explanation of who exactly has rights when it comes to your insurance contract.
Related posts:
- Financial Planning | Who Has Legal Rights In An Insurance Contract
- Financial Planning | Its All About Keeping The Faith!
- Financial Planning | What Is Indemnity Insurance Anyway?
- Financial Planning | What Is Non-Indemnity Insurance?
- Financial Planning | Are You Guilty Of Misrepresentation?
Article by Lawrence
Someone, who as he gets older, finds he has more questions than answers
Lawrence has written 150 awesome articles for us at Insurance Fundi
