In insurance, the insurance policy is a contract between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay.
A contract is a voluntary arrangement between two or more parties that is enforceable at law as a binding legal agreement.
Insurance is a means of protection from financial loss.
Types Of Life Insurance Explained by AccuQuote Life Insurance
In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language.
Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts.
Since insurance policies are standard forms, they feature boilerplate language which is similar across a wide variety of different types of insurance policies.
The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer.
In some cases, however, supplementary writings such as letters sent after the final agreement can make the insurance policy a non-integrated contract.
One insurance textbook states that generally "courts consider all prior negotiations or agreements...
every contractual term in the policy at the time of delivery, as well as those written afterwards as policy riders and endorsements...
with both parties' consent, are part of written policy".
The textbook also states that the policy must refer to all papers which are part of the policy.
Oral agreements are subject to the parol evidence rule, and may not be considered part of the policy if the contract appears to be whole.
The parol evidence rule is a substantive common law rule in contract cases that prevents a party to a written contract from presenting extrinsic evidence that discloses an ambiguity and clarifies it or adds to the written terms of the contract that appears to be whole.
Advertising materials and circulars are typically not part of a policy.
Oral contracts pending the issuance of a written policy can occur.