which of the following entities has the authority to make changes to an insurance policy

Insurance Contracts

An insurance contract is a document representing the agreement between an insurance company and the insured. Central to any insurance contract is the insuring agreement, which specifies the risks covered, the limits of the policy, and the term of the policy. Additionally, all insurance contracts specify:

weather condition, which are requirements of the insured, such as paying the premium or reporting a loss;
limitations, which specify policy limits, such as the maximum corporeality the insurance visitor will pay;
exclusions, which specify what is not covered by the policy.

Obviously, the contents of an insurance contract depends on the type of policy, what the insurance applicant wants, and how much he is willing to pay. The details of insurance policies are covered in Standard Insurance Policies. This article covers what is required of valid insurance contracts, since just valid contracts are legally enforceable.

There are 4 requirements for whatsoever valid contract, including insurance contracts:

offer and credence,
consideration,
competent parties, and
legal purpose.

Insurance contracts take an additional requirement that they be in legal form. Insurance contracts are regulated by state police force, so insurance contracts must comply with these requirements. The land may stipulate that only sure forms may be used for certain types of insurance or that the contract must have certain provisions. Additionally, contracts must be approved by the country insurance department before they tin exist used, to ensure they comply with regulations.

If a contract lacks any of these essential elements, and so it is a void contract that will not be enforced by any court. For instance, near contracts signed past a minor are void contracts because minors are not legally competent. A voidable contract tin exist nullified past a party if the other party breaches the contract, or considering fabric information was imitation or omitted in the contract. The party with the right to void tin also choose to enforce it, instead. For example, insurance companies can frequently void a contract considering the applicant provided false information on the application. Thus, if someone was in an auto accident, and that person previously filled out the insurance application stating that he had no speeding tickets, when, in fact, he had, then the insurance company can void the contract and not pay the claim. Although most contracts can exist oral, most are written, especially insurance contracts, because of their complication.

Offer and Acceptance

In insurance, the offer is typically initiated by the insurance applicant through the services of an insurance amanuensis, who must take the authority to stand for the insurance visitor, by filling out an application for insurance. Sometimes the application for insurance can be filed straight with the insurance visitor through its website. How the offer is accepted will depend on whether the insurance is for holding, liability, or life insurance. For belongings and liability insurance, the offering is the awarding for insurance and the payment of the 1^st premium, or the hope to practice so. In near personal lines of insurance, the agent can take the offer for the company, binding the company to the contract.

A binder is a temporary contract that can be oral or written that binds the insurance visitor to the contract immediately until it has a chance to examine the application, and issue a formal policy. Through the binder, the insurance becomes constructive immediately. Most binders are written and include general information, such as the blazon and amount of insurance, the name of the parties, and the time during which the folder is effective. Even so, once a formal policy is issued, then the terms of the policy override the binder. This is peculiarly truthful for oral binders, for one time a written policy is issued, the parole testify rule makes the written policy determinative where at that place is any conflict between the oral and written agreement. If a mistake was made in the policy, such as mistyping the incorrect policy value, then the contract can be reformed by correcting the mistake to prevent unjust enrichment of either party.

However, some agents cannot bind the insurance company, in which case, the insurance company must receive and accept the awarding, or it tin turn down it. The insurance is non effective until the company accepts the awarding.

In life insurance, the agent never has the ability to bind the company. The bidder fills out the awarding and pays the 1^st premium. The applicant is then given a conditional premium receipt — the virtually common type of receipt is the insurability premium receipt. If the bidder is insurable according to the company'southward underwriting standards, and so the life insurance becomes effective from the date of the application, or from the date of the medical examination.

Withal, if the premium is not paid when the application is filled out, and so the insurance will not become constructive until the policy is delivered and the premium is paid, and the bidder is in skilful health when the policy is delivered. Some companies require that the applicant not receive whatever medical treatment between the application and the commitment of the policy; otherwise the policy will not go effective.

Thus, a provisional receipt is similar a folder, but differs from it because coverage is conditional upon the health of the applicant, occupation, and other factors. A binder does not require the payment of a premium to become effective — often the insurer needs the time to determine what the premium will exist.

Contracts of Adhesion

While the insurance applicant is considered the 1 making the offer, the insurance company dictates the terms of the contracts. The insurance applicant must have the contract of adhesion totally or not at all. Because of differing legal definitions and rulings provided by different courts in the by and because of requirements imposed by state governments and their agencies, an insurance contract must be carefully worded to be legally constructive and to provide coverage in the way it was intended. This is why insurance contracts offered to the public are standardized. Another reason is because insurance companies can only summate competitive premiums based on actuarial studies, and these studies are based on sure limits and underwriting guidelines. Thus, almost insurance contracts cannot exist negotiated. Nonetheless, the insured can request specific riders and exclusions to the policy. A passenger (aka endorsement) is an amendment or addition to the basic policy that allows the policy to be tailored in acceptable ways for individual situations. An exclusion is a loss not covered by the contract.

Considering most insurance contracts are not negotiable, the courts have created case laws to benefit the insured. The showtime law, applicable to contracts generally, is that where there is an ambiguity in a contract, the ambiguity is construed against the maker of the contract, which, in insurance, is the insurance company. Thus, if the terms of a contract are not specific, and then the terms are interpreted in a way that would most benefit the insured. Case police force has as well instituted the principle of reasonable expectations, requiring that whatsoever exclusion or other qualification be conspicuous; otherwise, the insured is entitled to coverage that he reasonably expects.

Life insurance and some health insurance contracts commonly have entire contract clauses that require the attachment of whatever statements, including the application, made by the insured to the contract itself, to forestall whatsoever disputes later. Entire contract clauses also prevent incorporation by reference, which is alluding to other written works, such as the corporate bylaws, that the insurance applicant probably hasn't read.

Personal Contracts

Holding insurance contracts are personal contracts between the insured and the insurer. Property insurance covers the insured for the financial losses of property damage or loss, non the belongings itself. If the insured sells the property, the insurance does not transfer with it. The insurance cannot be assigned to anyone else without the insurer'southward consent. If property and liability contracts could be freely assigned, then someone who presents a low chance for the covered loss could buy a policy and sell it or requite it to someone with a higher risk, rendering the premium inadequate to embrace the greater loss exposure. For instance, a parent could purchase automobile insurance for himself, so make up one's mind to assign the policy to his teenage kid, who mostly would have to pay a higher charge per unit, since teenagers have a higher blow charge per unit than other groups.

On the other mitt, life insurance policies can be freely assigned, because the person insured remains the same. Indeed, many people who accept caused a terminal illness have sold their life insurance policies to 3^rd parties to get money to treat their illness or to provide care.

Beneficiaries can be changed, because irresolute beneficiaries does not change the insured risk, and so there is no upshot to the insurer if the policy owner changes the beneficiaries, but the insurer must be notified before the change has any legal effect, to protect the insurance visitor from paying the wrong person or from being forced to pay twice.

Consideration

Consideration is the value the parties to a contract give to each other — it is why the contract is agreed to. In insurance contracts, the insurer promises to pay for covered losses that the insured suffers, and the insured promises to bide by the contract and pay the premium. Most not-insurance contracts are bilateral contracts where the promises that each party makes are enforceable by the other party through legal proceedings. However, insurance contracts are unilateral contracts, where only the insurer makes a legally enforceable promise to pay for covered losses. The visitor cannot sue the insured for alienation of contract. However, insurance contracts are also conditional contracts — if the insured fails to pay the premium, or fails to abide by the contract, then the insurer is not obligated to pay for whatsoever of the insured'southward losses.

Almost non-insurance contracts are commutative contracts — the amount of consideration given by both parties are usually fairly equal. Thus, a contract to purchase existent estate usually requires a payment equal to its value. Insurance contracts are, yet, aleatory contracts, because the insurance company must pay only if certain events occur. If they don't occur, the company never has to pay, even if the insured has paid premiums for decades. However, if a covered loss does occur, and so the insurance company may have to pay much more than than it has collected in premiums. Thus, aleatory contracts are characterized past unequal consideration.

Competent Parties

The parties to the contract must be legally competent to form an agreement. Most adults take legal capacity to concord to contracts, unless they are intoxicated, mentally ill, or mentally retarded. The key requirement is the parties must know what they are agreeing to — a meeting of the minds; otherwise, there could be no agreement. To protect minors, the police does not give them legal capacity to agree to contracts except where specified by law.

An insurance visitor has legal capacity if it is licensed to sell insurance in that detail country, and is interim inside the telescopic of its charter.

Legal Purpose

All contracts must have a legal purpose to be enforceable past the courts, and, of course, insurance contracts exercise.

Horizontal hierarchical diagram showing the characteristics of insurance contracts and their interrelationships.

Performance and Discharge of Insurance Contracts

The operation required of most insurance contracts is for the insured to pay premiums and perform any other duties required by the contract, while the insurer'southward main duty is to pay for losses, if whatever occur. Almost insurance contracts, such every bit policies for property, liability, and health insurance, are indemnity contracts, where the insurance company is but required to compensate for actual losses, up to the policy limits. Withal, some contracts, such as life insurance policy contracts, pay the face amount of the policy. Besides that the insured must pay the premium to the insurer, neither party needs to perform until a loss occurs, but when a loss does occur, and then the insured must initiate performance before the insurer is required to do anything.

Insurance contracts require the insured to perform specific things or requires certain conditions, both before and after a loss, which the police sometimes categorizes equally conditions precedent and conditions subsequent. If the insured fails to perform these duties or satisfy these atmospheric condition, so the insurance company may be relieved of its obligation to pay the merits because of the breach of contract. However, in nigh jurisdictions, a court volition only grant relief to an insurer's obligation to pay a claim if the breach is material.

A condition precedent is either a condition that must exist satisfied or something the insured must exercise either before or when a loss occurs and before the insurer will perform, usually past paying the merits. If the insured does non satisfy a textile condition precedent, and then the insurer may exist relieved of paying the merits. Some common conditions precedent include:

requiring the insured to notify the insurer of any loss;
holding insurance requiring the insured to provide an inventory of the losses;
inability insurance requiring the insured to submit proof of disability to the insurer.

A condition subsequent is a condition that must be fulfilled later an issue requiring an act by the insurer. For case, if the insurance visitor wants to practise its subrogation rights and sue a 3^rd party for the insured's crusade of loss, and then the insurer may require the insured to show in court.

What Is the Existent Distinction between Condition Precedent and Condition Subsequent?

I take simplified the discussion about condition precedent and status subsequent considering in that location is much variation and defoliation as to how these terms are used.

A chief source of confusion is what constitutes the dividing line betwixt condition precedent and condition subsequent, the event that divides the before from the after. In regard to insurance contracts, is that the loss event or when the insurance visitor pays the insured? Courts have differed in deciding what effect separates a condition precedent from a status subsequent. Some take held that all of the atmospheric condition specified could be classified equally status precedents, since this is what the contract requires.

A common definition of a condition subsequent is any status that frees i political party from having to fulfill the contract. So, if an insured suffers a loss where the insurance company requires a specific type of proof for the loss, then the insured must provide the proof or the insurance company tin can deny payment, thus allowing information technology to opt out of paying for the particular loss.

Although the distinction between the 2 types of weather condition may seem pedantic, at that place are usually legal consequences equally to how a condition is classified. For instance, if a courtroom decides that an unfulfilled status is a condition precedent, many jurisdictions require the insured to bear witness that the condition precedent had been satisfied, based simply on that classification; but if the condition is classified as a condition subsequent, and then many jurisdictions, because of the classification, require the insurance company to prove that the condition was not satisfied, and that the unfulfilled condition was detrimental to the insurance company.

What compounds the problem distinguishing between these two types of weather is that how they are defined and how they are treated by the courts will differ according to jurisdiction. Information technology makes much more sense to only place the burden of proof on the political party who can most hands present the proof and not worry about the semantic distinction between condition precedent and status subsequent, since information technology is obvious that all required weather condition, regardless of their classification, must be satisfied for the parties to be obligated to complete their functioning requirements.

Insurance contracts can be ended by mutual agreement — recission. The insured tin end the contract by non paying the premium. If the insurance company has testify of fraud, it tin can inquire a court to rescind a contract unilaterally. However, life insurance policies usually have an incontestable clause which prevents an insurer from canceling a life insurance policy after a 1- or ii-year menstruum. The initial period gives the insurance company time to cheque the facts in the application, and possibly rescind the contract if information technology detects fraud. However, afterward this period, the life insurance cannot be canceled past the company for any reason other than nonpayment of the premium.