2.1 Elements of the Contract
A contract is binding on the parties involved and is enforceable by law. The elements that compose a legally binding contract perpetuating an insurance transaction are:
Offer & Acceptance + Consideration + Legal Purpose + Competent Parties = Legally Binding Contract
Insurance policies are contracts, and they are governed by the principles of contract law. In order for a contract to be legally binding, the process must include a proposal (offer) and approval (acceptance) of the offer, monies exchanged (consideration), a lawful reason for the contract (legal purpose), and all parties to the contract must be capable and adept (competent parties).
