Characteristics of

Insurance Contracts
1. Personal Contracts

Insurance protects insured, not the

property or liability subject to loss.
Assignment provision

In property insurance, if ownership of a

property changes, insurance contracts (policies)
cannot be transferred to another party (buyer)
without the insurers written consent.
In life insurance, the beneficiary or ownership
of policy may be freely reassigned.

Characteristics of
Insurance Contracts
2. Aleatory Contracts

A contract whose value to either or both of

the parties depends on chance or future
events, or where the monetary values of
the parties' performance are unequal.

The insurer's obligation to pay a loss depends on

uncertain events
Premium paid by Insured < Claim paid by Insurer

cf: commutative contract

The values exchanged are theoretically equal.

Characteristics of
Insurance Contracts
3. Contracts of adhesion

Insurance contracts are drafted by an insurer and

an insured must accept or reject all the terms and
conditions.
Insured gets the benefit of the doubt.
Courts tend to construe an ambiguous term in an
insurance policy in favor of an insured.

Contracts may be altered by the addition of riders

or endorsements
Rider or endorsement a document that amends or
changes the original policy.

cf: Contracts of cohesion

Contracts are drafted by both parties.

Characteristics of
Insurance Contracts
4. Conditional contracts

An insurers obligation to pay a claim

depends on whether the insured or the
beneficiary has complied with all policy
conditions.
The insurer may not pay a claim if one or
more of policy conditions are not complied.

Duties after loss Homeowners (p. 562)

Duties after an accident or loss Automobile (p.
585)
Duties after in the event of loss or damage CP

Characteristics of
Insurance Contracts
5. Unilateral contracts

Only one party makes a legally enforceable

promise.
Insured are not legally forced to pay
premium or renew the policy.