Legal Definitions - insuring agreement

An insuring agreement, also known as an insuring clause, is the fundamental section within an insurance policy that clearly states what risks the insurance company agrees to cover. It defines the scope of the coverage, outlining the specific events, perils, or liabilities for which the insurer will provide financial protection or other benefits, subject to the policy's terms, conditions, and exclusions.

Essentially, it's the promise from the insurer to the policyholder, detailing the circumstances under which a claim will be paid.

• Example 1: Auto Insurance Policy

  Imagine a car insurance policy where the insuring agreement for collision coverage states that the insurer "agrees to pay for direct and accidental loss to your covered auto caused by collision with another object or by upset." This clause precisely defines the type of damage (collision or upset) and the property (your covered auto) for which the insurance company will provide compensation. If a policyholder's car is damaged when they accidentally hit a tree, this specific insuring agreement is triggered, obligating the insurer to cover the repair costs, up to the policy limits and subject to the deductible.

• Example 2: Homeowner's Insurance Policy

  In a homeowner's insurance policy, an insuring agreement might state that the insurer "will pay for direct physical loss to the dwelling and other structures caused by fire, lightning, windstorm, hail, or vandalism." This agreement clearly lists the specific perils (fire, lightning, etc.) that are covered. If a severe hailstorm damages the roof of the insured home, this particular insuring agreement is activated, requiring the insurance company to cover the cost of repairs or replacement, provided all other policy conditions are met.

• Example 3: Business General Liability Policy

  For a small business, a general liability policy's insuring agreement might state that the insurer "will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." This agreement specifies the types of harm (bodily injury or property damage) and the legal obligation that the insurer will cover. If a customer slips and falls inside the business premises, sustaining an injury, this insuring agreement would obligate the insurer to defend the business against a lawsuit and pay any resulting damages, as long as the injury falls within the policy's definition of 'bodily injury' and occurred during the policy period.