Lesson 1: Insurance Documents (Proposal Form)

Unit 1: Definitions of Proposal Form
A Proposal Form is a form designed by Insurance companies to gather vital information about a prospective insured and the subject of Insurance.

When an insurance agent first approaches a client, he/she will present a proposal form. As a potential client, you will need to fill out this form truthfully. By completing/writing a proposal form, the insurer can then provide you with a list of benefits or coverage that the agent thinks you need.

This vital information is referred to as Material Facts. Though, the contents and wordings of the proposal form may vary from one insurance company to the other, but the objective is the same and which is to elicit all the information supplied by the proposer regarding the risk to be placed for insurance with a view to determining whether or not to accept the risk placed for insurance and if it would be accepted, at what premium rate, terms and conditions.

The insured is expected to answer all the questions asked on the proposal form in an honest manner.

Unit 2: The Role of the Proposal Form in an Insurance Agreement
Insurance companies devote their time in teaching their employees about effective proposal form writing and determining which clients are worth the risk or not. For example, if an agent is selling health insurance, he/she will let a client fill out health proposal forms.

Information entered on these forms will help insurance underwriters determine the degree of risk they can bear (or not) if they allow the person to claim insurance benefits from their company.

The wording on the insurance agreements may vary depending on the specific need that a client wishes his/her insurance policy to address. Before agreeing to an insurance contract, you may ask for a sample printable proposal form that you can review beforehand.

Unit 3: The Contents or Features of a Proposal Form
The contents of a proposal form may be classified into five as follows:

i Personal details
ii. Information relating to the risk
iii. Other or previous insurances
iv Previous claims history
v. Declaration

(i) Personal details – The purpose of the personal details questions is to identify the proposer and for correspondences.
(ii) Information relating to the risk – The purpose of this is to be able to assess the risk adequately.
(iii) Other or previous insurances – This is to determine whether or not the proposal(s) had been declined on the risk in the past.
(iv) Claims history – This is to have an insight into the claims history of the risk
(v) Declaration – This binds the proposer in the future if it is later found out that there had been concealment and/or misrepresentation of the material facts.

Unit 4: Functions of the Proposal Form
1. Proposal form helps insurance companies gather relevant information from the proposer regarding the risk to he placed for insurance.
2. It helps to elicit the relevant information gathered in (1) above.
3. It serves as the basis of every insurance contract.
4. It also serves as a means of assessment for the insurance companies in deciding whether to accept or reject the risk.
5. It allows the proposer to make a legal offer to the insurer.

Unit 5: Contracts Where Proposal Forms Are Used
Proposal forms are used in the classes of Insurance listed below:
– Motor Insurance
– Life Assurance
– Fire Insurance
– Goods in Transit

A Proposal Form may not be adequate for large risks such as Aviation, Engineering, Marine, Oil and Gas, etc. A slip may be preferable. A slip is a document prepared by a broker describing the details of the risk to be insured.

Scroll Down to Select Page 3 for the next topic – Lesson 2: Insurance Cover Note

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