Unenforceable Contract
What Does Unenforceable Contract Mean?
An unenforceable contract, in the context of insurance, refers to an insurance contract that cannot be legally enforced because it violates a statute, goes against public policy, or is associated with a prohibited activity. Since it is not legally binding, the policyholder cannot legally compel the insurance company to pay out benefits. Similarly, the insurance company is not legally entitled to receive premium payments from the policyholder.
Insuranceopedia Explains Unenforceable Contract
For example, an insurance policy that offers coverage for damages a policyholder might incur during an illegal activity would not be enforceable, as it violates the law.
For a contract to be enforceable, certain legal requirements must be met. For instance, a contract requires valid signatures. If the interested party does not sign the contract, it is not enforceable. Additionally, contracts often have expiration dates. Therefore, a policyholder who attempts to sue the insurance company for benefits after the policy has expired is not entitled to any payments. Lastly, handshake deals are also not considered enforceable contracts.
