The Making of a Life, Health and Disability Income Insurance Policy

An insurance policy is a contract between the policy owner (this can be the insured or someone else) and an insurance company. And because it is a contract, it is governed by rules that apply to general contract law.
One of the principles of contract law is the concept of “offer and acceptance. Each insurance contract requires an offer by one party and an acceptance of that offer by the other party.
The insurance application is the starting point. When you fill out and sign the insurance application for life, health or disability income insurance and you include the first premium with it, you are usually considered to be the party who is making the offer. As previously stated, an offer is the first step in forming a contract. The next step is the insurance company’s acceptance of the deal.
Insurance companies act through their agents. An agent having proper authority to act on behalf of a life, health or disability income insurance company can only invite an offer of insurance. (The life, health and disability agent cannot make a binding insurance contract. This differs from some other types of insurance, such as property and casualty insurance. Often agents selling auto or homeowners insurance, acting on behalf of the insurance company they represent, are able to make binding contracts in the field.)