The insurance contract is a personal, conditional or unilateral contract between the insurer and the insured which means that the insurer is liable to pay the claim if damage occurs to the insured. Furthermore, the insurance contract law also states that the contract must be in good faith and all facts and rules must be stated in the contract. The several types of insurance contracts are further explained below.

Indemnification

Once the risk is known by the insurance company, the person or business that seeks transfer risk becomes insured and the process of indemnification is complete. The insurance is given through a contract with terms and conditions along with the coverage specified and all the perils that are covered against him. This contract is known as insurance policy.

Conditional Contract

The property and liability insurance is known as the conditional contract because the insurer only fulfils the claim if the insured person fulfils certain conditions.

Personal Contract

The personal contract is the insurance policy contract that covers persons and not the operation of the business or the property. This insurance includes property and liability insurance. This contract is the agreement between the insurance company and the person for object or liability that is insured. It states when and how much money the insured person will get incase of a contingency.

Contract of Adhesion

Property and liability policy is also known as the contract of adhesion. The reason for this is that the insured person is in no way of bargaining on any terms with insurance company and has to accept what is being offered whereas the insurer is in control. However, laws regarding this contract say that if there are any ambiguities then they should be resolved in the insured's favor.

Unilateral Contract

In this contract the insurer is only entity that is bound to pay the claim in case of damages to the insured and if the insurer does any fault he can be charged and not the insured.

Contract of Indemnity

Property and liability policy is contract indemnity as the reason of this contract is to indemnify the person insured. The laws governing this contract say hat the insured person should not make any profit and in act many of the policy actually have deductible due to which the insured has to pay a small part of each loss.

Insurance Principles

Principals of insurance are the rules by which the insurers are able to estimate the amount of premium. The law they use is known as law of large numbers. According to this law the bigger in numbers is the homogenous disclosure the losses will more closely report to the loss probability. In case of unique coverage the premium gets higher. The insurance principles also state that the loss occurred must also be of significant value. In case the insurance company goes insolvent due to a catastrophic event such as when Katrina hit USA, then at state level the insured people are given funds. The insurance companies also have to reinsure in case of large scale damages.