An insurance contract differs from an ordinary commercial agreement because of the principle of utmost good faith, or uberrima fides. Both parties must disclose all material facts honestly, because the insurer relies heavily on the applicant's representations and cannot easily verify risk information before underwriting. Failure to disclose may constitute concealment, which can render the contract voidable. Within this framework, a representation is a statement of fact made by the applicant that, if materially false, voids the contract. A warranty is a promise or guarantee that a condition is or will be true, and breach of warranty automatically voids coverage regardless of materiality.
A typical insurance policy contains several structural components. The declarations, often called the dec page, personalize the standard policy form by listing the named insured, policy period, coverage amounts, premiums, and property covered. The insuring agreement is the core promise, defining what the insurer agrees to cover and under what circumstances. Exclusions list perils or situations that are not covered, clarifying and limiting the scope of coverage. Conditions set out the rights and duties of both parties. Endorsements, or riders, are written amendments that add coverage, remove exclusions, or change limits. A beneficiary is the person or entity named to receive the death benefit under a life or annuity policy. Assignment of a policy transfers its rights, typically by sale of the insured property, but most policies require insurer consent.
The legal environment also gives rise to several doctrines that govern how insurers and insureds interact after a contract is formed. Waiver is the voluntary and intentional relinquishment of a known right by the insurer, such as accepting a late premium. Estoppel prevents an insurer from denying a position that the insured reasonably relied upon to their detriment, even absent a formal waiver. A reservation of rights letter preserves the insurer's right to later deny coverage while still investigating or defending a claim. The principle of contribution allows an insured with duplicate coverage from multiple policies to recover from each insurer only its proportional share of the loss. Finally, claims fall into two categories: first-party claims, where the policyholder seeks compensation from their own insurer for loss to their own property or person, and third-party claims, where the insurer pays on the policyholder's behalf to an injured party.