What is an insurance contract?

An insurance contract, or insurance policy, establishes the legal relationship between the insurer and the insured. A potential insured makes an offer to the insurer to purchase the insurers services. In the application, the insurer will reveal all information relevant to the insurance relationship. The insurance relationship begins when the insurer accepts the insureds offer to purchase coverage, which is the effective date of the insurance policy. The insurance contract lays out the extent to which the parties allocate or transfer the contingent risk of loss to the insurer. It will detail the rights and obligations of the parties, as well as the types of situation giving rise to loss and the limits of the insurers responsibility to pay for losses incurred.

Note: Failure to disclose all material information may later lead to the contract being rescinded by the insurer.