Application forms and wordings

Application forms

As the insurance market changes, the use of application forms for commercial business is increasing. They have always been required for certain types of insurance, but the insurance industry has traditionally been satisfied with verbal or written communications summarizing the salient underwriting information. The traditional approach leaves a lot to be desired, since it lacks uniformity and does not seem to elicit the same degree of accuracy that applications with supplementary information does.

Top of page


Wording are constantly changing to respond to new legal developments, changes in reinsurance supply, changes in consumer expectations which fuels competition and the introduction of new products by creative individuals.

When developing a new wording or simply researching what the market norm is, it is useful to have access to internet sources. The most valuable sources are not available for free on the net; you must subscribe to the service; sometimes on-line and sometimes on CD ROM or floppy.

Top of page


Some of the terms used with applications and insurance contracts are as follows:

The expressed agreement or assent to an offer; one of the elements needed to form a legal contract, with an offer, consideration, competence of the parties, and a legal purpose. In an insurance transaction, acceptance occurs when an applicant indicates agreement to the terms of a binder or policy, usually by paying the premium.

Aleatory contract
A contract whose value to either or both of the parties depends on chance or future events, or where the monetary values of the parties’ performance are unequal. An insurance policy is an aleatory contract because the insurer’s obligation to pay a loss depends on uncertain events, while the insured must pay a fixed premium during the policy period.

Uncertainty of meaning; a lack of clarity in an insurance policy’s provisions, allowing the policy to be interpreted in more than one way. In coverage litigation, courts generally construe ambiguity in a policy against the insurer and in favor of the insured.

Reasonable expectations doctrine
A legal principle that insurance policy provisions capable of more than one interpretation should be construed in accordance with the objectively reasonable expectations of the insured.

A printed form developed by an insurer that includes questions about a prospective insured and the desired insurance coverage and limits. It provides the insurer’s underwriter with information for accepting or rejecting the prospective insured and rating the desired policy. Some policies–especially life, health and professional liability policies–make the application part of the policy, and misrepresentations in the application can void the policy.

Attestation clause
The final clause of an insurance contract where an officer or officers of an insurance company place their signature(s) to officially authenticate it as a binding contract.

An agreement issued usually in writing, but occasionally orally, by an agent or an insurer providing temporary coverage until a policy can be issued. A binder should include a specified effective time limit, be in writing, and clearly designate the company to which the agent is binding the coverage. The amount, the perils insured against, and the type of insurance must also be included.

A temporary record of a reinsurance agreement’s provisions, used while the formal reinsurance contract is being drawn.

Certificate of reinsurance
An abbreviated documentation of a reinsurance transaction, usually incorporating standard terms and conditions by reference.

Commercial package policy (CPP)
A coverage plan that includes a wide range of essential liability and property coverages for a commercial enterprise. The package policy usually features common policy conditions, common declarations, and two or more coverage sections.

Concealment / non-disclosure
The intentional withholding of information that will result in an imprecise underwriting decision. For example, concealment of an existing medical condition by an insured when applying for life or health insurance can be grounds for an insurer to void the policy or reduce the benefits.

For purposes of the insurance transaction, the consideration is the premium paid by the insured for the insurer’s promise to pay claims in accordance with the terms of the policy.

A legally enforceable promise made by agreement between two or more parties to create reasonably specific mutual obligations. Required elements of a contract are legally competent parties, a purpose that is not illegal or against public policy, an offer, an acceptance of the offer within a reasonable time, and consideration (which is any value or benefit acquired by a party, or actions undertaken or a sacrifice by a party with the purpose of fulfilling an obligation).

Contract of adhesion
A contract drafted by one party and offered on a take-it-or-leave-it basis or with little opportunity for the offeree to bargain or alter the provisions. Contracts of adhesion typically contain long boilerplate provisions in small type, written in language difficult for ordinary consumers to understand. Insurance policies are usually considered contracts of adhesion because they are drafted by the insurer and offered without the consumer being able to make material changes. As a result, courts generally rule in favor of an insured if there is an ambiguity in policy provisions.

Contra proferentem
The legal principle that if the meaning of a contractual provision is ambiguous, that meaning is preferred which operates against the party who drafted the contract or supplied the particular provision. (Latin for “against the proffering person.”) In lawsuits involving insurance contracts, most courts construe ambiguities against the insurer and in favor of the insured, because it is assumed that the insurer could have written the contract more plainly. Some courts are reluctant to apply this rule in cases where the insured equals or surpasses the insurer in business sophistication, knowledge of possible risks, and assistance of legal counsel.

Coverage form
Those portions of an insurance policy in which the insuring agreement and exclusions are contained.

Coverage part
Those portions of an insurance policy that make up a specific line of insurance, including conditions, declarations, coverage forms, causes of loss forms, endorsements, and any other mandatory parts.

A form provided by an insurance company to insureds for reporting payments under an open cargo policy when no marine insurance certificates are issued.

Ejusdem generis
“If the contract provision lists specific items and ends with a general term, the meaning of the general term may be limited to the same general class as the specific items.”

A written amendment to a policy that is part of the insurance agreement. In case of conflicting provisions, an endorsement supersedes the main part of the policy. If two endorsements contradict each other, the one with the latest date prevails.

A legal principle that when an individual represents a material fact to another, who alters his position in reasonable reliance on the representation, the first may not deny that the condition or fact exists. Examples: An insurer may be estopped from denying a claim submitted after the policy expired if the insurer (or its agent) acted as though the policy had been or would be renewed.

An insurance policy or bond provision that eliminates coverage for specific hazards, perils, property or locations. It designates what the insurer does not intend to cover under the contract. There are generally six recognized legitimate purposes for exclusions: 1. to eliminate coverage for uninsurable loss exposures; 2. to assist in the management of moral and morale hazards; 3. to reduce the likelihood of coverage duplications; 4. to eliminate coverage not needed by the purchaser; 5. to eliminate coverage requiring special treatment; 6. to assist in maintaining premiums at a reasonable level.

The first page of an insurance policy, which usually includes the policy declarations.

Top of page

Implied warranty
Courts have sometimes ruled that a warranty exists, even though it is not explicitly stated, when the warranty is implied or inferred from the nature of the transaction and circumstances. Example: For the purposes of an ocean marine contract, a vessel is implicitly warranted to be seaworthy by the vessel owner/insured even if the warranty is not stated on the face of the policy.

Insurance contract
An aleatory contract between an insured and an insurer, who agrees to indemnify the insured for loss caused by specified events.

Insuring agreement
The section of an insurance contract containing the obligation of the insurer to pay covered claims, subject to specified conditions and exclusions.

A class of insurance. Most insurers may be classified as either life and health or property and casualty. Sometimes three categories are used: life and health; fire and marine (which includes most property risks); and casualty (which includes most liability risks). Lines can also be classified according to whether the insured risks are primarily related to individuals and families (personal lines) or to businesses (commercial lines). State insurance regulators may employ any of these broad classes for some purposes, but more specific lines–automobile, homeowners, workers’ compensation, life and annuity, health and accident, commercial liability, etc.–define the covered risks more clearly.

Manuscript policy
An insurance policy designed or tailored for a large commercial insured; a unique coverage written at the request of a broker or a risk manager.

Material misrepresentation
The intentional concealment, distortion or fabrication of a material fact.

A false oral or written statement made with an intent to deceive.

Monoline policy
An insurance policy that provides coverage for a single line of insurance.

Multiple line policy
A policy that insures more than one line of insurance, such as property and casualty. A package policy or the Insurance Services Office commercial lines policies are multiple line.

Non-waiver agreement
A document signed by an insured shortly after a claim has been filed, stating that the participation of a claims adjuster in a loss adjustment does not waive the insurer’s continued ability to deny coverage under the policy.

Noscitur a sociis
“If the contract provision enumerates specific items, a person or thing will fall within the list if the person or thing is associated with the items on the list.” This was the basis most often cited for the war exclusion not applying to the WTC attacks and it was used in the oft cited case of Pan American World Airways v. Aetna Casualty & Surety Co., 505 F.2d 989 (2ndCir. 1974) where the court found that the hijackers’ acts were criminal rather than military and that they were the agents of a radical political group rather than a sovereign government.

A proposal to enter into a reasonably specific agreement, inviting another person’s consent; a contingent promise in exchange for another’s act (e.g., making payment), forbearance, or return promise. It is one of the elements needed to form a legal contract, with acceptance, consideration, competent parties, and a legal purpose. An offer is not made merely by advertising or soliciting customers. Asking a prospective insured to complete an application is a solicitation. The offer of insurance consists in issuing a binder, which invites the insured’s acceptance by paying the premium.

The written forms, endorsements, riders and attachments that make up an insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, the limits of insurance provided, the interests insured, the effective dates of the coverage, etc.

Policy conditions
The section of a policy or provisions in various places in the policy that indicate the general rules or procedures that the insurer and insured agree to follow under the contract.

Policy declarations
The section of an insurance policy containing basic underwriting information, such as the insured’s name, address, a description of insured locations or receipts.

Policy jacket
The outer covering of an insurance policy, which often contains common provisions of the policy.

A response to questions or a statement made on an application for insurance that the applicant indicates as true and the underwriter relies upon to issue a policy.

Reservation of rights
An insurer’s written notification to the insured stating its right to affirm or deny coverage for a claim that appears questionable. However, the insurer agrees to defend the insured.

Risk classification
An underwriting function of determining the characteristics of an insurance applicant or the applicant’s property or activities that have value in determining the probability of loss. Classification is the basis for determining whether a risk should be accepted for insurance and at what premium. Insurers modify, drop or add classifications according to their claims experience, striving for homogeneity of risk within each class while keeping the number of classes to a practical limit.

Unfairness or one-sidedness in a contract to such a degree that it is legally unenforceable or its validity is limited by a court to the provisions that are fair and reasonable.

A contract that does not have and never had legal force; null. Such a contract creates no legal obligations by either party and is treated as if it never existed.


  1. A statement to the insurer by an insured upon which the validity of the policy depends. The insurance contract is not binding unless the warranty statement is literally true. This is called an affirmative warranty. Traditionally, warranties appear either expressly or by reference on the face of the policy, and noncompliance is a complete defense for the insurer because a warranty is presumed to be material (of such substance or importance that the insurer relied upon it). On the other hand, representations may appear in documents collateral to or supporting the policy or may be oral; they are required to be substantially true but not absolutely so; and they must be proved to be material to relieve the insurer of its policy obligations. The strict rules of warranty have been modified in many states. Some statutes require that an insurance applicant’s statements be deemed representations rather than warranties; or a court may interpret a description of insured property as a general identification rather than a warranty, so the insurer may not deny a claim only because the property did not continue to meet the description in every detail.
  2. A promise by an insured as to a future event or condition during the policy term, such as maintaining fire sprinklers or burglar alarms in working order. This is called a promissory warranty.

Top of page

General Sources of Forms
  • IFC – Canadian standard Insurance forms and wordings can be purchased on-line.
  • Lloyd’s Wordings Repository – The database is an electronic source of over 10,000 of the most commonly used wordings, clauses and policy forms in the London market.

Top of page

Application Forms & Wordings

Contact us for assistance