When you obtain insurance in Nevada you are required to sign a policy. Many times, people sign these policies without thoroughly reading them, which can lead to problems in the future.
One of the reasons for not reading the policy is because it may simply look too long and complicated.
However, insurance policies are a contract between you and your insurance company that dictates the legal relationship between the two of you. Therefore, it is important that you understand exactly what you are signing.
Here are some tips to help you understand the basics of a typical insurance contract.
What makes a contract valid
Almost all insurance contracts contain some basic elements. Some of these are offer, acceptance and consideration. Contracts need all three of these elements to be legally valid.
An insurance company is essentially making you an offer: they will provide you with insurance if you accept the written insurance policy by signing it.
Consideration is something that you offer the insurance company in return for them insuring you. The regular premiums you pay toward the policy are generally your consideration.
Your insurance contract may be an indemnity contract. This means that the insurance company will pay you an amount equal to the total cost of your damages if an incident occurs.
Deductibles
A deductible is the amount of money you must pay yourself before the insurance company will cover the rest.
For example, if you file an insurance claim for damages of $20,000 and your deductible is $5,000, the insurance company will pay only $15,000 toward your damages.
Look for an excess clause in the contract. This means that your insurance company will only cover costs if the damage is over a certain amount. If they are under that amount, you must pay the entire cost yourself.
Additional contract requirements
There are some other common provisions that apply to all contracts. You must be legally capable of entering into the contract, meaning you are competent and of legal age. The contract also cannot contain any illegal terms.
You and the insurance company have a duty to be honest with the information you provide to each other. If either of you are not, the contract could be rendered invalid.
You may still have questions when reviewing an insurance contract. Do not sign it until you have answers to your questions.
