Definition - What does Contract mean?
A contract is an agreement between two parties. Usually, for it to be legally binding, the contract is in writing and affirmed by the signatures of the parties involved.
In terms of an insurance contract, it is an agreement between the insured and the insurer. The former agrees to pay for a policy to earn a benefit or benefits. The latter agrees to provide the benefit or benefits within a specified time and according to the terms mentioned in their agreement.
Insuranceopedia explains Contract
An insurance contract is valid if both the insured and the insurer have provided their assent to the terms of the policy. This is usually confirmed by signatures affixed to the document by both the insured and the insurer (or their legal representatives).
Another important issue that makes an insurance contract valid is receipt of premium payments. The insured does not just sign the contract. They are expected to include their payment. Some insurance policies do not provide coverage for the receipt of partial payment of the premium, while some policies do.
The insurance contract also follows the principle of utmost good faith. It means that both the insured and the insurer have voluntarily disclosed facts that are pertinent to the crafting of the policy. Failure to do so may make the contract invalid. If it is the insured's fault, he or she will not receive any compensation or benefit. If the insurer violates this principle, the company can be sued and possibly made to pay for damages to the insured.