The Characteristics of Insurance Contracts

Insurance contracts, in all countries, are subject not only to the same basic law that governs all types of contracts, but also to some legal principles that have been developed to handle the legal problems associated with insurance and summarized

In order for a contract to be legally valid there must be (1) an agreement between the two parties (usually refer to "offer and acceptance"), (2) a valuable consideration, and  (3) legal capacity and purpose.  Beyond the necessary contractual conditions, certain elements are peculiar to the insurance policy. Generally the policy is unilateraland only the insurer is obligated to act. It is also a conditional and aleatory contract.

As a contract of "utmost good faith," (uberrimae fidei) a certain degree of honesty is presumed from both parties.  This principle imposes a higher standard of honesty on the two parties than is usually expected in ordinary commercial contracts. To avoid a contract, a warranty (a statement contained in the contract and which requires that a particular condition exists) must be false, a representation (a statement made by the insured to the insurer on which the latter relies to price the contract) must be false and materially important, and concealment made with intent to deceive (the insured has an obligation to inform the insurer about facts that may be materially important).