Many proponents feel that filling up of the proposal form is a boring and tiresome job and the agent of the insurance company should take care of that. But actually, that should not be the case. The proposer himself is s

CS Professional · Insurance - Law & Practice · PYQS · June 2023
Many proponents feel that filling up of the proposal form is a boring and tiresome job and the agent of the insurance company should take care of that. But actually, that should not be the case. The proposer himself is supposed to fill up the same on his own. Despite that, many prefer the agent to do the job and most of the times the agents do it without asking for any details of the health status of the proponent. This innocent act may run into a nightmare, if the policyholder dies within two years from the date of commencement of the policy. In such a situation, mandatory investigations are carried out before passing such claims and the insurer may reject the claim, if the probe reveals that the policyholder had withheld some information which was material information for the purpose of underwriting by the insurer. It is the responsibility of the proponent to fill up the proposal form while the agent may only help him. Regulations too do not allow an agent to go beyond this." Thus, an insurance policy is a contract, and it must, therefore, conform to the rules of general contract law. Through a contract of insurance, the insurer agrees to make good any loss on the insured property or loss of life that may occur in course of time in consideration for a small premium to be paid by the insured. The business of insurance aims to protect the economic value of assets or economic value of life of a person. On the basis of the above facts, answer the following questions: (b) How can you apply the concept of warranty in this context?

Answer & Explanation:

A warranty is a promise collateral to the main contract, so that if there is a breach, it merely gives a right to damages and does not go to the root of the contract. In insurance contracts, however, a warranty corresponds to a condition in ordinary commercial law, that is to say, it entitles the party aggrieved by the breaking of a warranty, to repudiate the contract either ab initio or from the date of the breach, according to the terms of the contract. A warranty must be complied with strictly and literally. It makes no difference whether the breach of warranty is material or immaterial, fraudulent or innocent, or whether the insurer would have been equally ready to insure at the same premium if aware of the breach. A warranty in an insurance policy is a statement attesting that something the insured person says is true. An insurance contract is written on the principle of utmost good faith, meaning each party must trust that the other is being completely truthful. For the contract to be valid, you may have to warrant that an assumption the insurer is making is true. For example, if you are applying for life insurance, you must make a warranty that you are not terminally ill. If the insurer discovers that one of your warranties is untrue, it generally has the power to void the contract and not honor any claims you make. This is the only instance where the term "insurance warranty" is accurate. So in this case if the agent has declared the wrong information, then the insurance company has the power to void the contract and not honor any claim to the client.

Topics: Insurance Contracts

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