Definition of Insurance
Insurance is a promise of compensation for specific potential future losses in exchange for a premium. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of an unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policyholder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the excess), and the insurer pays the rest.

Why Do I Need Insurance
Insurance is a fact of life and a “hardship avoidance” as it helps you to get back to your feet after a loss. Leaving yourself uninsured puts you in a very precarious position and no matter how massive your financial empire may be, failure to purchase adequate insurance can put you in a desperate hole in a heartbeat should a loss arise. Disasters may ruin your financial empire and hence you need insurance to protect yourself, your assets, and your ability to earn income and to keep a roof over your head. In a nutshell, insurance gives you added peace of mind, leaving you to pay special attention to your business and other things without fear of a loss.

INSURANCE VERSUS GAMBLING

To some, Insurance remains a mystery which is expressed in that finite small print which strains both the eyes and level of concentration when reading. To others, insurance is charity or at the other extreme a burden imposed upon them by the law or third parties such as financiers or building societies. Whatever the example, the reality is that there is very little basic Insurance knowledge amongst the general public yet insurance should be the common intellectual property of all. This is so because Insurance constitutes a vital ingredient of any vibrant economy.Being in a contract of Insurance places obligations on all parties to that agreement. Some of the obligations placed upon policyholders are hardly expressed in policy documents.  They are a function of common law and it is assumed that every policyholder is aware of the same. One could say that ignorance of these obligations and principles constitutes no defence.

This effort is thus aimed at unraveling these basic elements which are silent in insurance policy documents.In such an effort one always toes a fine line between simplicity and absolute technical accuracy.Whilst neither should be compromised, laborious technical details and variations are omitted, as it is not intended to train readers to become insurance specialists but to become insurance conscious.

What then is the difference between insurance and gambling? In gambling one creates a risk of losing on a bet. The gambler is chancing on winning or losing. To the contrary, in Insurance one is protecting their risks. When an unforeseen insured event occurs one is transferring the financial cost of making good that loss from their profit and loss account to that of insurers. Whilst in gambling the outcome of any bet is a win or lose, in insurance one neither wins nor loses but is put back in the position they were before their loss arose. The distinction is thus clear; in gambling one creates a risk, whilst in insurance one protects a risk.

Fundamental to all insurances is the Doctrine of insurable interest, which further distinguishes insurance from gambling. The doctrine of insurable interest requires that there must be a legally recognizable relationship between what is insured and the policyholder. This relationship should exist in such a way that the policyholder benefits from the continued existence of that which is insured or is prejudiced from its loss or destruction. By way of an example, one ceases to have an insurable interest in a house or car when it is sold as they would stand to lose nothing should it be damaged after ownership has been transferred. The general ‘goodness’ of some motor vehicle sellers who sell their car together with the unexpired Insurance does not hold. Upon sale of the car and transfer of ownership, a seller ceases to have an insurable interest in that subject matter and the buyer should thus arrange their own insurance. In the worst case, insuring a nonexistent car not only results in a policy devoid of insurable interest but constitutes an act of fraud.

It must however be said that insurable interest does not only exist with ownership. It exists with part / joint owners, mortgages/mortgagers, executors/trustees etc to the extent of the financial prejudice which arises upon each one of them in the event of loss of the subject matter of that insurance.

It is advisable that when insuring one should disclose the nature of their insurable interest if that interest is less than ownership. As long as one can show that they stand to benefit from the continued existence of the subject of insurance or stand to lose from its destruction then that insurance is valid and it’s not gambling.Therefore, with these doctrines as Capitol Insurance Brokers we assure you insurance neatly packed.

INSURANCE CONTRACTS
Many people enter into different contracts but a few really understand the process of entering into a legally binding contract. Some may argue that it’s only a matter of agreement that guarantees a contract between two or more people. However for insurance contracts there are procedures which need to be followed by the insurer, the insured and the intermediary who are mostly brokers.

By definition an insurance contract is a lawful agreement between an insured and insurer whereby the insured agrees to pay a certain amount of money to the insurer as premium. In return the insurer agrees to pay the insured on the happening of certain specified events.

Brokers are normally construed as agents of the insured. To insurers, they are generally held as facilitators. Hence it is of vital importance to determine the existence and the scope of authority of the brokers. Such a determination will precede a conclusion on whether the insurer or the insured is bound by the broker’s acts or words.The extent to which communication to the intermediary or broker is binding should be ascertained, that is if an insured communicates to the broker, the broker should be in a position to address the matter to the insurer so that he can compensate the loss which occurs to the insured. Should the broker fail to do so then he can be held liable for professional malpractice.

Proposal form – There is no specific law which requires an insurance contract to be in a particular form. However with age and practice the proposal form has come to be accepted as the standard document which contains the material disclosures by an insured to an insurance contract. In most cases when the policy document has been issued it will state that the contract is on the basis of the statements made in the proposal form.

Cover note – it is usual in various types of property and related insurance e.g. motor insurance, when a proposer for insurance desires immediate evidence of cover from the insurer then the broker will issue a cover note on behalf of an insurer. The cover note is issued pending issuance of a policy document.

Staff at Capitol Insurance Brokers are highly trained and possess actual, implied and ostensible authority such that in circumstances where they perform their duties they do them in line with mandates from their principals. Therefore, we urge you all to consider the above when entering into insurance contracts. For more on this visit Capitol Insurance Brokers for neatly packaged insurance tailor made for you.