Health Insurance Contracts – Contract Basics

Insurance contracts are binding and legal contracts in which there is a legal agreement made between two or more eligible parties where specific coverage will happen in exchange for the cost of the health insurance premium. The two parties involved in health insurance contracts are the applicant seeking the insurance coverage and the health insurance company that will provide the coverage. Applicants must be of the legal age of consent and be considered mentally competent. The carrier in question must be state authorized to put together insurance contracts and the insurance representative must be licensed as per the state regulations.

While it is not law that the policies be in writing, contracts are always put in writing because of their complexity. So many details need to be discussed and written out in order to ensure the insurance contract meets the satisfaction of both the applicant and the insurance company involved. Each state has regulations and laws that dictate basic insurance contracts and their provisions. This is why such contracts are often of a rather form letter format and any additions must be in the form of riders or exclusions.

Health insurance contracts are always divided into four basic parts:

(1) Title page- the title page or the policy face is the page on which all the pertinent details such as the policyholder’s name, the policy’s terms and limits, the dates the monthly premium is due as well as the dollar amount of the premium are listed. This facilitates ease in finding the important dates and amounts as well as the highlights of the health insurance policy.

(2) Conditions- this page gives specific details to the expectations and rights of both the insured person and the health insurance company in question.

(3) Insuring clause- this the page that highlights the insurance company’s promise to covered losses incurred that are detailed in the policy’s coverage in exchange for the policyholder’s faithfulness in complying with the policy terms and payment of the monthly premium agreement.

(4) Exclusions- a list of risks and details that the insurance company will not cover, meaning things that are not included in the insurance medical coverage policy.

Valid insurance contracts are legally binding on the part of both parties, the applicant or policyholder and the carrier providing the coverage. Applicants agree to the monthly premium and the terms of the insurance contracts while the insurance companies agree to pay for the costs that are specified under the coverage plan.