Like all contracts, there must be an offer, acceptance and consideration to make a legally binding contract. The offer is usually the application for insurance. The acceptance is usually the insurance company's approval of the application and issuance of the policy. In some instances, an agent of the insurance company can make a binding contract for the insurance company. The contract is a bargain whereby the policyholder pays premiums to the insurance company and, in return, the insurance company agrees to pay for losses if the loss comes within the terms of the contract.
Insurance contracts can cover just about anything.
For example, a talented baseball pitcher may insure his arm. If something has value, it can probably be insured. The most common types of insurance contracts are those for life, property, health, and automobiles. Evaluations of Risk Generally, an insurance company can choose which risks it wishes to insure by evaluating the insured's health in the case of a health or life insurance contract, or the location and condition of the property in the case of property insurance. For example, an insurance company may decide not to write flood insurance in coastal areas.