Legal protection insurance: the contract
When you sign a contract, you also have to accept the general conditions of insurance. Here’s what you need to know about the contract for legal protection insurance.
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Insurance contract
The insurance contract (under private law) is an agreement through which, against payment of a premium, one party (the insurer) promises to to pay certain benefits to another party (the policyholder) or a third party if an insured event occurs. The insurance contract is usually preceded by an application.
Policy
In everyday language, the term ‘policy’ is used to refer to the insurance contract. The policy provides documentary evidence of the conclusion of an insurance contract. The insurance contract does not take effect until delivery of the policy, which also contains the general insurance or contract conditions.
General conditions of insurance
The general conditions of insurance contain the provisions applicable to all contractual parties. They are an integral part of the insurance contract. Insurance companies must adhere to the Insurance Policies Act (VVG/LCA) when defining these general conditions. This act contains certain provisions that can never be modified by any contractual agreement, and others that may be modified only if it is not to the disadvantage of the policyholder or beneficiary. Since the general conditions of insurance constitute an integral part of the insurance policy, the insurance companies must make them available to prospective policyholders during the application process. As applicants usually receive these conditions separately, they are asked to confirm on the the application form that they have read and agree to the contents.
Insurance cover
This describes the persons, legal cases and amount covered, where the insured benefits apply and for how long. Once the insurance company has accepted the application, the insurance cover – or in some cases the waiting period – will begin on the start date of the contract.
Policyholder and insurer
The policyholder is the contracting party that is entitled to insurance protection, along with any other specified persons, through the conclusion of the insurance contract. The policyholder is responsible for paying the premiums.
The insurer is the contracting party that is obliged to provide benefits to a policyholder if an insured event occurs.
Insured event
An insured event is an incident that meets the criteria for making the insurer responsible for paying benefits and the policyholder entitled to compensation.
Risk
The term ‘risk’ refers to the likelihood of an event occurring that will lead to insured loss or damage. At the same time, when and how the event happens is uncertain and accidental.
Subjective risk
The term ‘subjective risk’ refers to the perceived likelihood of an event arising from insured persons’ behaviour and, in particular, to the fact that the interest of these persons in the insurance benefits can influence the occurrence of the insured event and the amount of these benefits.
Objective risk
If the insured person is unable to influence the likelihood of an insured event occurring or the amount of loss or damage, this is called an ‘objective risk’.
Duty of care
The policyholder is obliged to exercise due care. If a policyholder seriously violates this duty of care and it leads to a claim, the insurer may reduce the payout.
Discover more important terms in the field of legal protection insurance here.