Insurance Contract Law: Conclusion, Content, Rights, Obligations and Termination
Formation and content
The insurance contract is consensual but must be evidenced in writing; the insurer issues a policy and, where relevant, general and special conditions that form part of the contract. Key content: parties, insured risk, sum insured/sum assured, premium, term, exclusions. Duty of disclosure: the proposer must answer the insurer’s questions truthfully and completely. A breach that is intentional or due to gross negligence entitles the insurer to avoid the contract or reduce the indemnity; ordinary negligence gives narrower remedies. The insurer’s duty to inform about the cover, exclusions and the right to withdraw (14-day cooling-off for life and certain distance contracts) is a frequent exam point.
Obligations during the term
Premium payment, notification of aggravation of risk, and notification of the insured event within the contractual/statutory period are the core policyholder duties. The insurer must handle claims, pay within statutory timeframes once documents are complete, and give reasons for refusal. Subrogation transfers the insured’s claim against the third-party tortfeasor to the insurer up to the amount paid.
Termination
Grounds include expiry, mutual agreement, cancellation for non-payment (after notice), withdrawal within the cooling-off period, and termination on the insured’s death (life). Insurers may terminate for non-disclosure or fraudulent claims.
Worked example
A proposer omits a prior fire loss when asked. If the omission was intentional, the insurer may avoid the contract and refuse the claim; if merely negligent, the indemnity may be reduced proportionally to the premium that would have been charged. Trap: candidates often assume any inaccuracy voids the policy - only intentional or grossly negligent misrepresentation triggers avoidance.