If you want to buy some insurance, how do you go about it? Who do you ask? What will the insurer’s seller want to know?

First of all, you need to make contact with the people who sell insurance. Next, you have to provide the insurer with enough information to enable him decide whether or not he wants to sell insurance; then you would need to complete a proposal form and the insurer will have to issue various documents setting out t the details of the contact and providing proof that a contract of insurance exists. In this unit we will look at each stage of this process in turn.

From Proposal to Policy

If you want to buy insurance, you must contact the people who sell it. Insurance is sold to the general public in two ways: by salesmen and by intermediaries. At this stage the applicant for insurance cover is known as the proposer and on completion of all the processes a policy form is issued evidencing the proof that a contract of insurance exists.

Proposal Forms

We have noted that insurance contracts require utmost good faith from both parties. It is therefore essential that each party to the contract discloses all material facts known to him. As a matter of practice there are some general required data which the insurance company shall always be interested in. In order to ease the problem of disclosure for the prospective insured, the insurance company asks some lead questions which would help the prospective insured to remember and disclose material facts.

These lead questions prepared in the form of a questionnaire comprise the proposal form. The proposal form is therefore a document drafted by the insurance company seeking answers to the main material aspects of the risk being proposed.

The Need for a Proposal Form

The acceptance of a particular insurance contract is based on the insurer’s clear knowledge about the circumstances of the other contracting party. Insurers use the proposal form to elicit relevant information from prospects. This serves two main purposes. Firstly, an honest prospect may not know which fact about him is material and hence may fail to disclose same.

Secondly, it is the best way an insurer can obtain information that will enable him decide whether to accept the particular risk or not.

Almost all the proposal forms contain a declaration that the proposal is the basis of the contract and that the insured warrants the truth of the answers contained therein. The proposal form therefore serves as the basis of the contract of insurance.

A secondary purpose of the proposal form is that it serves as a means of advertising the insurance company and some of its other products. b. The Use of Proposal Forms

In some classes of insurance, insurers prefer to receive completed proposal forms for reasons already mentioned, but there are circumstances where practice or convenience demands that they are dispensed with.

In marine insurance proposal forms are not usually used, so also is in large fire insurance. In practice broker’s slips are used.

In Nigeria each company has its own form for each class of business as such students are advised to obtain a selection of proposal forms form each class of business and to compare their structure and questions. c. Common Questions

The following are common questions found in most proposal forms regardless of the class of insurance

Proposer’s name – This is for the purpose of identification and the nature of physical or moral hazard.
Proposer’s address is an important factor in underwriting motor insurance, theft insurance and all risks insurance. This is because different geographical areas present different chances of loss.
The proposer’s address is also required for correspondence purposes.
Proposer’s occupation – A proposer’s occupation shows the degree of exposure. Some occupations present abnormal hazards, e.g mining, belonging to an airline crew, plastic manufacturing textile manufacturing, woodwork.
Previous and present insurance history-– Every proposer is required to disclose his previous and present insurance history whether insurers have imposed special terms or premiums, or have declined the proposer or his risk in the past.
Claims or loss history-– Insurers will wish to know previous losses, whether insured or not.
Particular questions – Apart from the general questions discussed above, there are certain bits of information which are specific to the class of insurance being proposed. Proposal forms for each class of insurance therefore have particular or specific questions relating to the hazards concerned. Examples of the type of information required are given class by class below:

Fire and Special Perils Insurance

Questions as to:

  1.  Construction and use of buildings and their value
  2.  Nature and value of contents
  3. Nature of processes carried on
  4.  Extensions of cover required.

Motor Insurance

  1. Details of the vehicle
  2. Use of the vehicle
  3. Age, experience, claims and accidents of all regular drivers d. Type of cover required.

Life and Personal Accident Insurance

  1.  Age, occupation and medical history of the life to be assured
  2. Height, weight and details of hazardous pastimes

Public Liability Insurance

  1. The nature of work carried on
  2. Details of dangerous materials used
  3. Numbers of employees and their annual wage roll at premises and elsewhere
  4.  Details of lifting plant and vehicles other than those licensed for road use
  5.  Limits of liability to be covered.

 Workmen’s Compensation / Employer’s Liability Insurance

  1. Numbers and grouping of employees and their annual wageroll per group;
  2.  Details of dangerous machines, boilers and pressure vessels and lifting apparatus;
  3. Details of dangerous substances used;


There is usually a declaration to the effect that the proposal is the basis of the contracts, and that the proposer will accept the insurer’s usual form of contract. Also, that the proposer warrants the truth of his answers.


Below the declaration and questions there are places for the proposer’s signature and the date.

 Cover Notes

A cover note is a temporary policy of insurance. It is issued as temporary protection, usually for a period of 30 days (in the case of motor insurance) before a permanent certificate is issued.

Cover notes are issued in the following circumstances.

As evidence that an insurance cover is in force before the policy is issued.

To enable the insurer obtain the information necessary for the preparation of the policy

To grant temporary cover until a survey is carried out.

In all the above stated cases, the initial cover could be confirmed by letter but in the case of motor insurance, booklets of cover notes preprinted are used.

Cover notes have the same legal statues as the policy as such if a loss occurs during the period the cover note is in force, the insurers are liable in the terms of their standard policy unless special terms have been agreed on and included in the cover given.

Certificates of Insurance

A certificate of insurance is required when insurance cover is compulsory by law.

In Nigeria the following classes of insurance are compulsory by law as such certificates are required to be issued as evidence of the company with the relevant status.

Motor Insurance

The Motor Vehicle (Third Party) Insurance Act 1950 requires that where a vehicle is on the public highways, there must be in force a policy of insurance covering the user’s liability for third party personal injuries caused by the vehicle or its use. The Act states that the policy is effective unless and until an insurance certificate in the prescribed form is delivered by the insurer to the insured.

The certificate must show:

  1. the name of the policy holder
  2. the registration number of the vehicle
  3.  the inception date of the cover of the vehicle
  4.  the expiry date of the cover
  5.  the persons or classes of persons entitled to drive
  6. the limitation as to the use of the vehicle.

 Marine Cargo Insurance

Section 67(1) of Insurance Act 2003 requires that insurance in respect of goods to be imported into Nigeria must be made with an insurer registered under the Act. Section 67 (3) further requires that every letter of credit or such similar document issued by any bank or other financial institution in Nigeria in respect of such goods shall be on a carriage and freight basis only.

A marine insurance certificate is therefore issued for each consignment as evidence of insurance cover in Nigeria.

 Policy Forms

When a contract has been made between the proposer and the insurer, it is recorded in a document called a “policy”. The policy is the evidence of a contract of insurance and in the event of a dispute occurring, it is the policy to which the court’s attention will be drawn.

Each insurer has his own standard form of policy wording for each class of insurance but in Nigeria through market agreement the same wordings are used in most classes of insurance.

In Nigeria, schedule policies are used. The scheduled wordings are discussed below:
The Heading – The heading states the name and address of the insurance company.
The Recital or Preamble Clause–All policies start with this clause. It refers the parties to the contract, the proposal form and declaration as the basis of the contract and to the premium.
The Operative Clause--This clause states the extent of the cover and sets out the circumstances in which the insurance will operate.

The operative clause usually starts with the expression, “Now this policy witnesseth…” and this goes on to describe the insurer’s undertaking”

Exceptions–The exceptions clause sets out the circumstances under which the insurer will not be liable under the policy. The exceptions are sometimes included immediately after the insured peril and sometimes they are contained in a separate section of the policy.

Conditions–Most policies are subject to conditions which are usually stated in the policy.

The general conditions in most policies except marine insurance include:

  1. Identification
  2.  Observation
  3. Notification
  4. Precautions
  5. Admission
  6. Contribution
  7. Cancellation
  8. Arbitration

The details of these conditions are found in the policy document. You should endeavour to obtain the document and study the details.


  1. What is a proposal form?
  2.  What is a cover note and certificate of insurance?
  3. Define the policy form.
  4.  What are the details in motor insurance


Documentation in the contract of insurance is important. Some of the documents are used to obtain information from the proposer or insured while others are used as evidence of the contract of insurance either temporarily or permanently.


In contract of insurance, various documents are used. The proposal form is the first document a buyer of insurance will be required to complete. The document seeks to obtain necessary information which is material to the risk being proposed.

The cover note is a temporary policy and in motor insurance; it is a temporary certificate. It is issued pending the preparation of the permanent certificate of motor insurance. The cover note has the same legal status as the policy.

The certificate of insurance is required when insurance cover is compulsory. Common classes of insurance requiring certificate of insurance include motor insurance and marine insurance.

The policy document is the evidence of a contract of insurance. It is referred to when there is a dispute. In Nigeria schedule types of policies are used. The wordings for each class of policy are the same by market agreement. The policy document contains the heading, recital or preamble clause, operative clause, conditions and endorsements.


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