What is a Personal Contract in insurance terms?

A Personal Contract in insurance terms is defined as a contract that cannot be transferred to another person without the consent of the insurer. This principle is significant because it reflects the understanding that the insurer agrees to cover the specific individual based on their unique circumstances, risk profile, and personal information. Insurance contracts often involve a detailed consideration of the insured person’s attributes, such as health, driving history, or property specifics, which means the insurer has vested interests in maintaining the same policyholder.

Transferring the policy to another individual could change the risk assessment and the terms of the contract, potentially affecting the insurer's obligations. Therefore, personal contracts, such as life insurance or health insurance, inherently restrict the ability to transfer benefits to ensure that the terms and coverage remain closely tied to the original policyholder. This ensures contract integrity and prevents unforeseen risk scenarios that could arise from such transfers.