Legal Requirements of an Insurance Contract

An insurance contract must meet specific legal requirements to be valid. These requirements are recognized under insurance law worldwide.

Offer and Acceptance

The policyholder applies for insurance, and the insurer approves it. Once accepted, the contract becomes legally binding.

Consideration

The policyholder pays premiums, while the insurer promises compensation for covered losses. Without payment, the contract may be invalid.

Legal Capacity and Purpose

Both parties must be legally capable of entering the agreement, and the policy must cover lawful activities only.

Disclosure and Transparency

Insurance contracts depend on full disclosure. Failure to provide correct information can lead to policy cancellation.

A valid insurance contract protects both parties and reduces legal disputes.

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