Competent Parties

What Does Competent Parties Mean?

Competent parties are those who are legally capable of entering into agreements and contracts. For an insurance contract to be valid, both parties must be competent. Individuals who may not qualify as competent parties include minors and those with severe mental disabilities.

Insuranceopedia Explains Competent Parties

Competent parties are the only individuals permitted to enter into legally binding contracts because they are presumed to have the mental capacity to think independently and fully comprehend their actions. For instance, an eleven-year-old child is not considered to have the intellectual capacity required to obtain a property insurance policy. This is the practical reason why a parent or legal guardian, rather than the teen, has to be the one who buys the policy and signs for coverage on plans like the best car insurance for teens.

In most regions, a person must be at least 18 years old to be deemed competent to sign insurance contracts. However, in some areas, the minimum age for competence is 21. Anyone shopping for their first policy after they turn 18 can find a walkthrough of how the process works in this first-time car insurance guide.