Insurance contract documentation

Bola Adegbaju

It has been said that insurance is a contract between the insurance company and the insured (also known as the policyholder). The terms and conditions of this contract must be documented in such a way that will make it clear that both parties to the contract are Ad-idem  ( i.e both parties are of the same mind). The documents expected to be exchanged between the parties from proposal to the conclusion of the contracts include but not limited to:

Proposal form, receipt of payment, certificate, cover note, endorsement, policy document.

Be sure you get the relevant documents after the contract has been concluded.

• PROPOSAL FORMS

Proposal forms are questionnaires used by the insurance company to elicit the information about the proposed risk from the prospective client.

Most people feel it is too stressful to complete this form and they request that their agent, broker or representative of the insurance company does it for them. Whichever way you choose, make sure the correct information is documented because that is the basis of underwriting the risks. This information determines the premium you pay, the type/scope of cover, the policy terms and conditions.

• RECEIPTS OF PAYMENT

It is obviously an evidence of payment. Whenever you make a payment, ensure you obtain an evidence, especially for your life policies and avoid paying cash premium to anybody. A lot of people are victims of non-remittance of premium by their agents who collected cash.

• CERTIFICATES

Certificate of insurance is the document issued by an insurance company as an evidence of insurance contract. It summarizes what is contained in the policy document, the key aspects and conditions of the policy. It is usually a page.

Policies That Require Issuance Of Certificate

1.Motor Insurance

2.Marine insurance

3.Employers’ Liability/ Workmen’s Compensation

4.Group life Insurance

• COVER NOTES

A cover note is different from certificate and it is a temporary document given to policy holder by the insurance Company as evidence of cover until a final insurance certificate or policy is issued. It is for a short period, say one month or less.

Policies That Require Issuance of Cover Notes

Motor insurance

Goods-In-Transit Insurance

Major Information Required On Cover Notes Or Certificates

Name of insured, Class of insurance, Name of insurance company, Date issued, Period of cover, Type of cover e.g third party or comprehensive in motor insurance, Details/ description of risk, Policy number, Certificate number, Stamp and signature of insurance company, Limit any one loss (for goods in transit policy)

• ENDORSEMENTS

There are times when a client has to add or remove something from the existing cover.Any alteration in the contract or the risk insured is effected by an endorsement or by a separate memo which becomes part of the policy.

• POLICY DOCUMENT

This is the main contract document issued by the insurance company to the policyholder. It contains the terms and conditions that describe the ways in which the policy will operate and specify what is included and what is not, what the insurer promises to do and what the policyholder promises to do.

Note that every non-life insurance policy document is divided into the following major parts:

Declaration: This page is generally the first page or two of the policy. It is a brief description of the coverage and you can find the answer to most basic coverage questions. It identifies who, what and when of the policy.

Agreements: It simply outlines the basics of the insurance contract and the responsibilities of both parties (insurance company and policy holder).

Definitions: It explains the key terms used in the policy document so that one can understand the insurance contract better.

Exclusions: The exclusion section describes the property, the losses, causes of losses, or perils that are not covered.

Conditions: It states the specific conditions the insured must meet for claims to be paid e.g timely claims notification.

Schedule: It identifies the policyholder and the details of the subject matter of insurance, the type/scope of cover, the exclusions, deductibles, payment mode and the schedule.

Policy coverage: The scope of cover is usually stated under this section. For instance in motor insurance, it is stated that the cover is either third party or comprehensive.

In marine insurance, it can either be clause “A” or clause ”C”.