Contract

A contract in insurance is the legally binding agreement between the policyholder and the insurance company that outlines the terms, conditions, and obligations of both parties. It specifies what coverage is provided, what benefits are payable, how premiums are calculated, and what exclusions or limitations apply. The insurance contract serves as the foundation for determining how claims are handled and what rights and responsibilities exist under the policy.

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In health, dental, life, or disability insurance, the contract is typically made up of several key components: the application for insurance, the policy document, the schedule of benefits, and any riders or amendments. Together, these form the complete legal agreement. Once the insurer accepts the application and the first premium is paid, the contract takes effect and remains valid as long as premiums are paid and terms are met.

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Example:

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If you apply for a personal health insurance plan and the insurer issues a policy outlining your coverage for prescription drugs, dental care, and vision, that policy - along with your signed application - forms the insurance contract between you and the insurer.

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What to Watch For:

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Always read your contract carefully before signing or renewing coverage. It is a legal document, so terms such as exclusions, termination clauses, and renewal conditions are enforceable. Keep both the policy and any updates or endorsements together, as they collectively represent the full contract.