What are the essentials of a valid contract of insurance?

A valid contract of insurance requires essential elements that create a binding agreement between the insurer and the insured. The correct combination includes an offer, acceptance, and consideration.

The offer establishes the terms under which the insurer is willing to provide coverage. This can be initiated by either party, typically starting with the prospective insured submitting an application for insurance. Once the insurer reviews the application and agrees to the terms, acceptance occurs, confirming the insurer’s agreement to provide coverage as outlined in the offer.

Consideration refers to something of value that each party exchanges to form the contract. In the context of insurance, the insured typically provides premium payments, while the insurer commits to providing financial protection or indemnity against specified risks.

This combination of offer, acceptance, and consideration fulfills the requirements for forming a legally enforceable contract per contract law principles, producing a clear understanding of obligations and expectations for both parties involved in the insurance agreement.