What is the structure of an insurance contract? Like most contracts, it’s going to begin with
the introductory phrases. In a normal contract, it’s got a preamble. In these, it is called the declaration that
is the statement of what this contract is. Oftentimes, it will identify the parties out
front but in some situations, it will be more of a moveable platform that makes reference
to the insured at the end. But again, it declares what it is, the nature
of the contract itself, the type of insurance or the objectives of the parties entering
into it. From there, we’ll go to definitions. The definitions portion is extremely important
because the contract itself will employ these definitions when laying out the specific terms
of insurance coverage and so the precision of the definition particularly contingent
risks that are defined with the definitions section can be extremely important for the
nature and extent of coverage that you’re purchasing under the contract. From there, you go to the specific terms of
insurance and this will be the contingent risk, the amount of coverage, the named insured,
etcetera. So this is the core aspects of who is insured,
to what extent and for what potential loss or contingent harm that could result. Conditions. It will put specific conditions upon coverage,
at what point is the insurer obligated to perform or indemnify, hold harmless pay towards
the insured. Conditions might be anything from presenting
the claim within a specific amount of time to making certain in the event of an auto
accident that you get a police report. So these are specific contingencies that are
required before the insurer is obligated under the policy to perform which is in their case,
again, holding harmless or indemnifying. Exclusions. The insurer will exclude certain particular
contingencies. Now, we talked about in the definition sections
about what is included, any specific type of coverage a lot of that can be covered there
but when the insurer wants to specifically identify potential contingencies, harms that
could arise or have exceptional likelihood of occurring, they’ll oftentimes exclude these
from the policy. This can be a benefit to the insurer as well
as the insured if you identify certain types of risks that have a higher probability of
coming true and you exclude these from the policy. It’s a lower risk to the insurer of having
to pay out or having to perform under the contract so it could cause the premiums under
the policy to be lower and at the same time again, these identified things are more likely
to happen, so the insurer is less likely to have to pay out. But at the same time, these exclusions can
be really harmful to the insured. They actually want this type of coverage but
they can’t get it or the insurer in unwilling to provide coverage for this so they lay out
these exclusions and it could be specific occurrences, could be specific types of property
and again, it could be specific types of damages even that they won’t cover. And then, endorsements. Endorsements are modifications to the standard
forms of the contract. This is a signature-page document requires
a bunch of initials beside this thing. It’s where you take the standard terms of
the document and begin to modify them specifically for the individual client. This is honestly where most of the work itself
is done. And then, policy riders. These are additions or amendments to a contract
signed by both parties and in some way altered the original contract. Generally what riders are made to do is either
to add another layer or form of coverage to up coverage premiums or to extend the length
of time for coverage. It’s an addition to the original contract. You don’t get to the whole process of re-entering
the contract again. You simply enter into a rider that undertakes
the amendments that you so desire. From there, are the final signatures and then
placed into a band or a jacket for the insured. So this is the general structure that you’re
going to see in a contract and of course, they could come in different orders than this
any of the different types of provisions but the majority of contract you see for insurance
follow this general standard format as do most other contracts that you encounter in
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