Essentialia Of Insurance Contract

Question 1

What are the essentialia of an insurance contract?

Answer 1

Risk, cover, period of cover, premium

Question 2

Whats Premium in Insurance contracts

Answer 2

• Consideration given in return for an undertaking to provide policy benefits.

-Parties must agree on the payment of monetary premium

Question 3

What is Cover in Insurance contract

Answer 3

Cover refers to the insurers’ obligation to pay out an amount to the insured or provide an equivalent. That is, repair, replace in terms of indemnity insurance upon the occurrence of the insured/covered event
In terms of non indemnity insurance, the insurer pays out the agreed amount upon the occurrence of the covered event.

Question 4

What is risk in insurance contracts

Answer 4

Risk refers to the occurrence of an uncertain event that leads to an undesirable consequence.

Risk usually describes the dangers that insurable interests are exposed.
The dangers will result in the risk materialsing or not. NB: it is necessary for the risk to actually materialise.

There must also be a causal link between the risk insured against and the actual loss suffered by the insured - This is viewed as a factual issue, and the test used to determine this is the proximate cause test.

Question 5

What is period of cover?

Answer 5

Refers to the period a contract is entered (e.g) on a month to month basis or for a year.

Contract will terminate after the expiry period of the contract unless renewed.

In the case of non-indemnity insurance, the period is indefinite.

In the case of life cover, the period cover runs until the insured event takes place, which is the death of the insured.