Although insurance policies are contracts, and thus subject to the same rules governing interpretation and enforcement as any other contract, most courts recognize insurance policies as specialized category of insurance subject to distinctive rules of contract interpretation. The practice of developing standardized terms and even entire policies stems in part from the volume of litigation based on the interpretation of insurance contracts.
Insurance companies take careful note of judicial interpretations of policy terms, so terms interpreted in an insurers favor quickly become popular and terms that have been interpreted against an insurer usually fall from favor (Winn and Wright, 2005 p. 21-22). Insurance policies are one of the major rising firms in the current society that presently obtain greater demand due to its very nature, the provision of security among those individuals who may require such assurance. The most common insurance policies are those covering health, home and contents, and vehicular insurances.
It is prudent to have these basic policies in place to reduce health care costs and to cover damage or loss to your home or personal property. Obtaining insurance shares require extensive assessment and various procedures in order acquire the provision. Discussion In terms of insurance application, insurer generally relies on the information submitted during the application process to determine whether to underwrite the policy and to calculate an appropriate premium for risks that it underwrites.
Insurance companies generally incorporate the information disclosed on the application into the insurance policy by including it as an attachment and requiring the insured to provide a representation as to the accuracy of the information it contains. If the information contained in an application is later discovered to be incorrect due to the fault of insured, then the insurer will excused from performing its obligations under the policy (Winn and Wright, 2005 p. 24).
In a common type of health insurance policy, the policyholder wishing to visit a doctor or undergo a procedure cannot expect the insurer to pick up the entire tab. In directly, this serves as the same goals as the insurable interest requirement by requiring the policyholder to have enough actual concern over the matter that make an out-of-pocket lay. In the main, however, health insurance is designed to inhibit excessive consumption of medical care by persons who have an undoubted insurable interest in their health or that of a family member.
Insurance premiums are calculated by the amount of risk that a particular policyholder represents. The company firm assesses the individuals previous records as well as the persons response to various questions in relation to the filed insurance request; hence, it is essential to obtain knowledge on those factors that may affect the downsizing of insurance costs, such as vehicular liability records, previous health care hospitalizations, previous legal offenses, etc.
The company needs to maintain the standards of their clients in order to obtain higher profits; hence, they provide lower cost premiums for those who have clean records or those that are less likely to cause insurance compensation, while those individuals that are evidently predisposed at any possible insurance usage, such as sick individuals, possesses traffic violations, etc. may encounter increased premium costs (Stair, 2005 p. 103). Insurance policies are subdivided into two party categorizations namely first party and third party insurance compensation.
First party insurance compensates the insured for losses suffered directly by the insured. In the context of commercial insurance policies, standard forms of first-party insurance include property insurance, commercial crime insurance, and business-interruption insurance. Third-party insurance provides compensation for losses suffered directly by third parties, liability for which is transferred by tort or other law to the insured (Stair, 2005 p. 103; Winn and Wright, 2005 p. 23).
In the context of commercial insurance policies, standard forms of third-party insurance include commercial general liability standard forms of third-party insurance include commercial general liability insurance, directors and officers insurance, and errors and omissions insurance (Winn and Wright, 2005 p. 23). Insurance policies range from various types that are available depending on the clients preferences and needs. First, life insurance policy pays benefit to named beneficiaries when the insured person dies. The most common reason to purchase life insurance is to provide money for a spouse and/or children whom are left behind.
On the other hand, less often, people purchase insurance in order for them to have cash on hand to cover expenses after death (Irving, 2003 p. 21). Insurance policies can provide coverage for named or specified risk, or for all risks to the subject matter of the policy. A named-risk policy will describe the specific risks covered; a loss caused by any risk not enumerated is not covered. For example, the traditional homeowners insurance policy is a specified risk policy that insures against losses caused by fire, wind, storm or theft, but does not generally provide any compensation for losses caused by flooding (Clifford and Jordan, 2006 p.
171). If the insurer resists paring a claim brought by an insured under a named-risk policy, the insured will have to demonstrate that the loss was caused by one of the named risk. On the other hand, All-risk policies are generally more favorable to the insured because the likelihood that any loss will be covered is greater, although the insured will normally pay a higher premium for more comprehensive damage (Winn and Wright, 2005 p. 24).
Lastly, there are various considerations that must be taken into account when planning to acquire insurance policies in order to decrease the premium ratings: (1) seek out group plans (For many self-employed people, the cheapest and easiest way to obtain insurance is through a professional organization, trade association, or similar membership organization), (2) buy from an insurance company, (3) comparison shop (If shopping for insurance during a time when prices are low, it is essential to try locking up in a low rate by signing for a contract for three or more years), (4) increase your deductibles, and (5) find a comprehensive package (Fishman, 2006 p. 176).
Conclusion In the end of the discussion, the primary purpose of insurance remains for security purposes especially for unpredictable events. Different types of insurance are available, such as risk, life, fire insurances, etc, and deciding the best possible policies depends on the person requiring such program. It is therefore essential to obtain the best possible insurance plan in order to maximize the insurance usage.
However, note as well the insurance company based their premium costs in the records of the requesting client; hence, it is essential to maintain sound and clean records in order to avoid further premium increase. Increasing the flaws on the clients records upon application, such as traffic violation records, hospitalizations, etc. increase the cost of premiums.
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