Insurance Contract Act

In Act 50/1980, of 8 October, Spanish legislation establishes the rights and obligations of parties when formalising an insurance contract

According to Act 50/1980, of 8 October, an insurance contract is defined as 'an agreement by which the insurer, in exchange for collecting a premium, becomes obligated to provide compensation to the policyholder for any damages suffered in cases where an event occurs where the risk has been subject to coverage and indemnification, up to the agreed-upon limits and in the form of a lump sum, a series of payments, or some other agreed-upon provisions'. 

One of the most important parts of the insurance contract is the section that refers to the general and particular terms and conditions. This is discussed in article 3 of the insurance contract act, which specifies that 'the general terms and conditions, which in no case can have a harmful effect for the insured, must be included by the insurer in the insurance proposal, if there is one, and must be included in the contract policy or in a complementary document, which shall be subscribed by the insured and a copy of which will be delivered to him/her. The general and particular terms and conditions must be drawn up clearly and accurately. In particular, the clauses detailing the limitations of the insured persons' rights must be highlighted, and explicitly accepted in writing. 

According to the insurance contract act, the policy document that establishes the characteristics and coverage of the insurance taken out must include the following: 

  • The full name or company name of the contracting parties along with their addresses, plus designation of the additional insured party and beneficiary when applicable. 
  • The type of insurance involved. 
  • The nature of the covered risk, clearly and understandably describing the guarantees and coverage types being granted under the contract, as well as any exclusions and limitations that may be applicable, emphasised typographically. 
  • The designation of the assets being insured and their locations. 
  • The amount insured or scope of the coverage. 
  • The amount of the premium, plus any other surcharges and taxes. 
  • Due dates for the premiums, and place and form of payment. 
  • Duration of the contract, including the specific dates and times when its validity will begin and end. 
  • If a mediator is involved in the agreement, the name and type of mediator. 

The duties in the insurance contract

With respect to the duties or obligations of the policyholder, article 4 of Insurance Contract Act 50/1980, of 8 October, establishes the following: 'the policyholder must pay the premium under the terms and conditions stipulated in the policy. If there is an agreement for premiums to be paid periodically, the first one will be payable upon signature of the contract. If no place for the payment of the premium is determined in the policy, it will be understood that this will be the address of the policyholder'. 

Meanwhile, the insurance contract act establishes that the insurer must 'pay the compensation once the investigations and expert reports needed to establish the existence of the claim and the amount of the resulting damages have been completed. In any case, the insurer must pay the minimum amount that they owe, according to the known circumstances, within forty days following receipt of the claim.' 

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