Life Insurance Features

Incontestibility - in the United States, life insurance contracts may not be contested by the insurer at any point after the contract has been in force for two years. The insurer has the burden to investigate fully anything they wish to make sure the insured is an acceptable risk within those two years. Any material mistatements on the insurance application (which generally forms a part of the contract) cannot be used as a reason for the insurer not to pay the death benefit, as long as it does not constitute fraud on the part of the insured. The insurer's only recourse if there is no fraud is they can adjust the death benefit to correct for the correct age or sex of the insured if they are different from what the application noted.

Parts of an Insurance Contract

Definitions - define important terms used in the policy language.
Insuring Agreement - describes the covered perils, or risks assumed, or nature of coverage, or makes some reference to the contractual agreement between insurer and insured. It summarizes the major promises of the insurance company, as well as stating what is covered.
Declarations - identifies who is an insured, the insured's address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount.
Exclusions - take coverage away from the Insuring Agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.
Conditions - provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not met, the insurer can deny the claim.

Reinsurance

The practice of insurers transferring portions of risk portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. Also known as "insurance for insurers" or "stop-loss insurance".

This procedure is used by insurance companies to reduce the risks associated with underwritten policies by spreading risks across alternative institutions. It's like portioning out pieces of a larger potential obligation in exchange for some of the money the original insurer received to accept the obligation. The party that diversifies its insurance portfolio is known as the ceding party. The party that accepts a portion of the potential obligation in exchange for a share of the insurance premium is known as the reinsurer.

Coinsurance

Coinsurance refers to the sharing of insurance by two or more insurance companies in agreed proportion. For the insurance of a large shopping mall, for example, the risk is very high. Therefore, the insurance company may choose to involve two or more insurers to share the risk.Coinsurance can also exist between you and your insurance company. This provision is quite popular in medical insurance, in which you and the insurance company decide to share the covered costs in the ratio of 20:80. Therefore, during the claim, your insurer will pay 80% of the covered loss while you shell out the remaining 20%.

Endorsements

Endorsements are normally used when the terms of insurance contracts are to be altered. They could also be issued to add specific conditions to the policy.

Deductible

DeductibleA deductible is the amount you pay in out-of-pocket expenses before your insurer covers the remaining expense. Therefore, if the deductible is $5,000 and the total insured loss comes to $15,000, your insurance company will only pay $10,000. The higher the deductible, the lower the premium and vice versa.

Principle of Waiver and Estoppel

A waiver is voluntary surrender of a known right. Estoppel prevents a person from asserting those rights because he or she has acted in a such a way as to deny interest in preserving those rights.Presume that you fail to disclose some information in the insurance proposal form. Your insurer doesn't request that information and issues the insurance policy. This is waiver. In the future, when a claim arises, your insurer cannot question the contract on the basis of non-disclosure. This is estoppel. For this reason, your insurer will have to pay the claim