BCP Ch 6 Insurance Policies and Documentation Overview

Introduction

• General insurance policy: A crucial contract outlining the obligations of the insurer and rights of the insured.

• Focus: Detailed examination of insurance policy along with other important documents.

Proposal Form

• Definition: The proposal form (application form) is the primary tool for insurers to obtain information about the risks to be insured.

• Importance:

  • It forms the basis for the underwriter's decision to accept risks and determine premium rates.

  • Incorporated into the insurance contract, making it part of the binding agreement.

• Key Details:

  • Proposer must provide accurate and comprehensive information.

  • The declaration at the end confirms the truthfulness of the provided information.

Questions in Proposal Form

• General Structure: Generally includes five main sections:

  1. Details of the proposer and/or the insured.

  2. Period of insurance.

  3. Details of the risk to be insured.

  4. Subject matter of insurance.

  5. Insurance history of proposer/insured.

• Details Required:

  • Includes proposer’s name, address, occupation, and other risk-specific information.

Specifics to Address

• Details of Proposer and/or Insured:

  • Identification (full name, address).

  • Occupation may influence the underwriting process (higher risk jobs).

  • Interested parties may include lenders or other insurers.

• Period of Insurance:

  • Typically one year; exceptions for specific policies like travel or domestic worker insurance.

  • Begins on policy’s effective date and ends on expiry date.

• Details of Risk to Insured:

  • Underwriters will ask questions tailored to the specific type of risk (e.g., construction details for fire insurance).

• Insurance History:

  • How this helps underwriters assess risk levels for potential fraud or past claims.

Declaration

• Content:

  • Proposer confirms the accuracy of answers and accepts the proposal as the basis for the contract.

  • Includes a warning about the necessity of truthful disclosure per Section 23(5) of Insurance Act 1966.

Cover Note

• Purpose: Temporary coverage issued while awaiting further information or policy issuance.

• Contents:

  • Details such as insured's name, risks covered, valid period.

  • Acts as a temporary policy with legal standing.

Certificate of Insurance

• Context: Necessary for legal compliance to prove insurance is in force (e.g., motor insurance).

• Characteristics: Provides essential details about the policyholder and coverage.

• Display Requirements: For workplace insurances to be displayed prominently.

Insurance Policy

• Definition: Written evidence of an insurance contract, pivotal before activation of coverage.

• Wording Importance: Legal document where ambiguities favor the insured under the contra proferentem rule.

Structure of an Insurance Policy

1. Heading: Contains insurer’s information.

2. Preamble or Recital Clause: Identifies parties and references the proposal form.

3. Operative or Insuring Clause: Specifies what is insured. Two types:

   • Named perils.

   • All risks.

4. Schedule: Personalizes the policy with relevant details.

5. Exclusions: Clearly defined limitations on coverage to control risk.

6. Conditions: Responsibilities and rules governing policy execution by both parties.

Warranties

• Definition: Strict promises the insured must comply with during the contract period.

• Types:

  • Implied Warranties: Automatically apply under the contract.

  • Express Warranties: Written in the policy.

• Non-compliance leads to severe consequences, including claims denial.

Endorsements

• Usage: Amendments to policies for adjustments such as changes in coverage limits or insured parties.

Renewal Notices and Certificates

• Issued typically 30 days before expiry, outlining terms for renewal.

• Renewal certificates may be issued with minor changes.

Claim Form

• Essential for processing claims; includes sections for proposer details, accident specifics, and evidence of injuries.

• Different formats exist for various types of insurance.

Comparison: Exclusions, Conditions, and Warranties

• Exclusions: Define policy boundaries, and claims can be repudiated if applicable.

• Conditions: Necessary for the validity of the contract.

• Warranties: Must be strictly followed; breach leads to liability cessation.

General Conditions and Exceptions

• Essential requirements for coverage and situations where insurers will not pay claims.