THE CONTRACT OF INSURANCE
A contract of insurance comes into existence when an offer by the proposer is accepted by the insurer.
The proposer makes the offer by completing and submitting to the insurer the proposal form.
This form seeks information in relation to: –
1. Particulars of the proposer
2. Particulars of the subject matter
3. Circumstances affecting the risk and
4. The history of attachment of the risk
The proposer signs a declaration at the bottom of the form to the effect that the answers given constitute the bases of the contract between him and the insurer. The declaration is referred to as “Basis of Contract Clause”. Submission of the proposal form to the insurer constitutes the formal offer by the proposer. The insurer is not bound to accept the offer. However, he may as he assesses the risk, extend temporal cover to the proposer.
This is the name given to the temporal cover extended to the proposer by the insurer in the interim period between submissions of the proposal form and its formal acceptance or rejection. It may be a detailed document setting out the terms and conditions of indemnity or may be simple letter from the company.
The issue of a cover note may be justified on 2 grounds:
1. It is argued that insurance is formal and rigid hence time is of the essence before cover is extended
2. It is necessary to extend immediate cover to the proposer since the subject matter is exposed to risk.
If risk attaches/arises during currency of the cover note, the proposer recovers in accordance with the terms of the cover note, if formal, or on the basis of the policy applied for:
Cover notes generally last for 30 days.
ACCEPTANCE OF THE PROPOSAL FORM
The insurer is not bound to accept the proposers offer, however, if the accepted, it signifies a contractual relationship between the two. The insurer may signify acceptance of the proposal form;
1. By formal communication
2. By conduct
3. Issue of the policy
4. Acceptance and retention of premium raises a presumption of acceptance of the proposal form.
COMMENCEMENT OF INSURANCE COVER
As a general rule, cover commences at the time and date specified by the cover note or policy. However, if neither is specific as to the time, cover commences at the beginning of the next full day and a full day is a period of 24 consecutive hours from midnight.