LML4805
Assignment 1
Semester 1
Due 10 March 2026
, LML4805 INSURANCE LAW Assessment 01/2026
1. Difference between an insurance contract, insurance policy,
proposal form and cover note
An insurance contract is the legally binding agreement between insurer and insured in
terms of which the insurer undertakes to indemnify the insured or pay a benefit upon the
occurrence of an uncertain future event in exchange for a premium. It comes into
existence once consensus is reached on the essential terms such as risk, premium and
subject matter.¹
An insurance policy is the written document embodying the terms of the insurance
contract. It serves as evidence of the contract but is not the contract itself.² A contract
may exist even before a policy is issued.
A proposal form is a pre-contractual document completed by the prospective insured.
It contains material information used by the insurer to assess the risk and determine
whether to accept it and on what terms. Statements in the proposal form may amount to
representations or warranties.³
A cover note is a temporary document issued by the insurer as interim proof of
insurance pending the issuing of the final policy. It provides provisional cover subject to
the intended policy terms.⁴
Example: A person applies for motor insurance by completing a proposal form. The
insurer issues a cover note for immediate protection. Later, a policy is issued as written
proof of the insurance contract.
Assignment 1
Semester 1
Due 10 March 2026
, LML4805 INSURANCE LAW Assessment 01/2026
1. Difference between an insurance contract, insurance policy,
proposal form and cover note
An insurance contract is the legally binding agreement between insurer and insured in
terms of which the insurer undertakes to indemnify the insured or pay a benefit upon the
occurrence of an uncertain future event in exchange for a premium. It comes into
existence once consensus is reached on the essential terms such as risk, premium and
subject matter.¹
An insurance policy is the written document embodying the terms of the insurance
contract. It serves as evidence of the contract but is not the contract itself.² A contract
may exist even before a policy is issued.
A proposal form is a pre-contractual document completed by the prospective insured.
It contains material information used by the insurer to assess the risk and determine
whether to accept it and on what terms. Statements in the proposal form may amount to
representations or warranties.³
A cover note is a temporary document issued by the insurer as interim proof of
insurance pending the issuing of the final policy. It provides provisional cover subject to
the intended policy terms.⁴
Example: A person applies for motor insurance by completing a proposal form. The
insurer issues a cover note for immediate protection. Later, a policy is issued as written
proof of the insurance contract.
