What unique element is required for an insurance contract to be legally enforceable?

For an insurance contract to be legally enforceable, the principle of indemnity is essential. This principle ensures that the insured is compensated for their loss but does not profit from the insurance. Indemnity is a fundamental aspect of property and casualty insurance, reflecting the intent to restore the insured to their financial position prior to the loss, rather than allowing them to gain an advantage from the event.

The concept of indemnity creates a fair and ethical foundation for the insurance relationship. Without it, policies could lead to moral hazard, where the insured might deliberately cause a loss to benefit financially from the claim. This is why indemnity is integral to the enforceability of insurance contracts.

Other elements like agreement on premiums, coverage limits, or the signature of a witness, while they may be important in their own right, do not uniquely establish the enforceability of the contract in the way that the principle of indemnity does. Premium agreements ensure that both parties understand the cost of the coverage, while coverage limits define the maximum amount payable, and witnessing a signature may serve as a form of verification but do not address the core ethical principle that makes the contract binding.