Competent Parties
Both parties to a contract must be of legal age, mentally competent, and not under the influence of substances that impair judgment. A policy issued to an incompetent party is voidable by that party.
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Practice This Concept
A 16-year-old signs an application for an individual disability policy without a parent's involvement. Regarding the element of competent parties, this contract would most likely be:
Voidable by the minor because minors generally lack full legal capacity to contract — One of the four elements of a valid contract is that the parties have legal capacity. A minor generally lacks full capacity, so a contract made with a minor is typically voidable at the minor's option. Insurers therefore commonly require an adult policyowner for coverage on a minor. The contract's enforceability is not cured by paying a premium, and the protection runs to the minor, not the insurer.
National insurance concept
A dispute over whether an insurer must pay a claim under the terms of a life policy is governed primarily by:
Contract law — An insurance policy is a contract, so disputes about coverage, conditions, and benefits are decided under contract law principles — offer, acceptance, consideration, and performance of promises. Tort law governs civil wrongs such as negligence, which is not the basis of a claim-payment dispute. Recognizing whether a matter sounds in contract or tort determines which rules and remedies apply to the dispute.
National insurance concept
- General InsuranceA 16-year-old signs an application for an individual disability policy without a parent…
- General InsuranceA dispute over whether an insurer must pay a claim under the terms of a life policy is …
- General InsuranceFor a health insurance contract to be valid, the parties must have legal capacity and t…
- State RegulationsWhich of the following is NOT required for a valid insurance contract?
- General InsuranceA contract of insurance that covers the insured's planned criminal activity would fail …
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