1. Formation Of Insurance Contract
Requisites of validity required by general rules of law of contracts:
Agreement (offer+acceptance)
Two parties (capable of contracting)
Valuable consideration
Purpose (legal/public policy)
Fairly made
Full knowledge of all materials and facts

2. The Parties Of Insurance Contract
Two
parties/three
Insurer insured/assured

3. One person contracting with himself
cannot conclude insurance contract
Authority of
agent doesn’t
An agent of The agent
extend to any
insurance represents both
transaction
company cannot of the parties in
where his
insures his own the same
personal interest
property. contract.
is opposed to
the principal’s.

4. The offer to conclude insurance
contract should designate the second
party by:
Name
Profession
Domicile

5. In some insurance policies the name of
the insured party maybe left blank.
Policies of In this case He
insurance it is becomes a
deemed to party of
maybe be issued contract by
issued “for on behalf of “ratifying
the benefit “some the policy
of whom it person not issued for
concerns” designated” his interest”

6. The Insurer
Joint stock
companies
Cooperative
association Mutual of
for assurance
assurance

7. The Insured
He should have
Valuable interest
Natural/legal protected from loss
person or injury by reason
of any peril it
maybe exposed to.

8. The right of being assured:
Any
Falls within
citizen
the class of Guaranteed
protecting
inherent and by law and
himself
inalienable constitution.
against
rights
loss.

9. The person Capable •
must be Having the capacity of •
competent to exercise.
conclude the
contract
Insurnace Capacity of •
adminstration
contract being
A minor  can conclude •
an act of insurance contract
adminstration related to his property.

10. Consent of the parties of insurance
contract
General rules of law of
contracts:
Contractual Valid
offer acceptance

11. Customary methods of making
insurance contracts:
The person
desiring to be
insured makes the
offer
Issuing and
Sign a written
delivering the
application drawn
policy+payment
by the insurer
of first premium
Delivering the
Forward it to the
application to the
general officers
agent of insurer

12. The requirments of a valid offer:
It should express a definite commitment in
its material terms creating a power of
acceptance to the offeree
The offer must be complete by determing the
subject insured and the perils against the
premium.
The offer should be communicated to the
offeree hence an offer is made when the
offeree receives it.

13. The insured
normally proceeds
the offer
The insured is
If the insurer in his
compelled to
acceptance introduce
contract with the
new terms or
insurer according
conditions.
to insurer terms.
There is no
In some cases the
negotiation since
insurer becomes an
insurance contract is
offeror (when a
a contract of
proposal form is used)
adhesion

14. Contains questions
which the
proposed assured
is required to
answer
It is considered
as an offer from It could not be
the insured, and The considered as an
the insurer is the proposal offer of insurance
offeree who may forwarded from
accept or reject
form insurer to insured
it
It doesn’t lead to
the conclusion of
contract in case of
insured
acceptance

15. The proposal form contains the following informations:
Description Description of Description of Previous history
of the the risk subject circumstances of the proposed
proposed to proposed affecting the risk assured:
assured: insurance: insured:
•His name In case of: The insured answers •Experience of the
•His address questions directed to proposed assured:
•His profession •Personal accident him through which the the insured has to
(the insured “the insured has insurer tries to find state if he has
will not be held to state his age, whether there are suffered loss by the
responsible of weight and height” special circumstances peril subject to
misrepresentat making the risk greater proposed insurance.
ion if he has 2 •Property than usual. •Relations with other
professions insurance •In personal accident insurers:
and stated “he has to give full He should be informed He should state if he
one only) description of the about the past & has ever made a
as the rate of property subject to present state of health. similar proposal to
premium will the proposed •In liability insurance other insurers, and
not be insurance” He should be informed whether this proposal
affected. about state of the was declined or
insured premises,... accepted.

16. Propsal form for life insurance
“questions asked by the insurer relates to”:
.
Name, residen Sum to A proposal
Whether the
ce, profession, be form has
policy is for
occupation, da insured ever been
the benefit
te & place of declined or
of insured
birth, hight& Type of accepted at
estate’s or of
weight of policy an extra
named
proposed required premium
beneficiaries
Name &
Whether a adress of Details of
proposal previous Details of any
the usual
form ha ever illness & of circumstances
medical
been made to medical affecting the
attendant
the insurer advice & suitability of
concerned or treatment the life insured
to other in last 2 for insurance
insurers. years purpose

17. The proposer has to sign at the end of
the proposal that the answers he has
given are true, and they are to be
considered “the basis of the contract”.
The proposer maybe asked to declare that he’s
in good health, and authorizes the insurer to
seek information from any doctor he has
attended. Any answer given by the doctor is to
be considered “the basis of the contract”.
If it is revealed that the statements made by the
proposer are false or fraudulently stated, after
the insurer acceptance, he would be
responsible for a breach of contract.

18. The effect of the proposal form
After being filled
& signed by the
proposed
insured
The insurer will be
bound after the
Is forwarded to
acceptance to issue
the insurer or to
a policy complying
his agent
with the terms of
the form
Acceptance of
the insurer to The proposal form
this offer leads represents an offer,
to the showing terms the
conclusion of insured is willing to
insurance contract
contract