Key Characteristics of Insurance Contracts and Underwriting
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Key Characteristics of Insurance Contracts
- Unilateral: A contract where only one party makes an enforceable promise, while the other party follows the established conditions.
- Conditional: The insurer's obligation is triggered only upon the occurrence of a specific insured event.
- Aleatory: Performance depends on an uncertain future event; payment is only made if the event occurs.
- Adhesion: The contract is drafted by the party with greater bargaining power; the other party must accept or reject the terms as-is, without negotiation.
The Underwriting Process
Underwriting is the process of evaluating future risks to determine appropriate pricing. Insurance companies generate revenue through underwriting (collecting premiums) and investing. Premiums must... Continue reading "Key Characteristics of Insurance Contracts and Underwriting" »