DEFINITION of 'Cooperation Clause'

An insurance contract clause that requires the policyholder to assist the insurance company in the event that a claim is filed against the policy. A cooperation clause allows the insurance company to obtain more information about the nature of the circumstances behind the claim, since the insured party is more likely to have detailed information about what happened.

BREAKING DOWN 'Cooperation Clause'

Insurance companies may underwrite policies for thousands of policyholders across a wide geographic area. The insurers are unlikely to know the day-to-day activities of the insured, and are even less likely to know the events that transpired before another party made a claim against the insured. This is the primary reason why insurance policies contain provisions compelling the insured to provide information about what happened if an accident or other event occurs.

Assisting an insurance company in the case of a claim does not mean that the insured has to appear in court. Depending on the policy and the amount of claim, the insured may wind up only speaking with the insurer over the phone in order to present his or her side of the events. The insurance policy language may specify the level of cooperation that the insured must provide, such as assistance in an investigation. The insured is expected to provide accurate information and to desist from lying.

Cooperation clauses are often considered essential or material components of an insurance policy contract. The ultimate reasoning for its importance is that the insurer wants to know as much information as possible in order to avoid paying for a claim that it should not have to pay for. If the insured decides not to cooperate, or if the courts determine that the insured is withholding information and is not acting in good faith, the insurance company may determine that the insured is in breach of contract and therefore, forfeit his/her coverage.

RELATED TERMS
  1. Insurance Premium

    An insurance premium is the amount of money that an individual ...
  2. Classified Insurance

    Classified Insurance is coverage provided to a policyholder that ...
  3. Insurance Industry ETF

    An insurance industry ETF invests primarily in insurance companies ...
  4. Capital Stock Insurance Companies

    Capital stock insurance companies are companies that get their ...
  5. Cover Note

    A cover note is a temporary document issued by an insurance company ...
  6. Experience Refund

    Experience refund is the portion of an insurance company’s premiums ...
Related Articles
  1. Insurance

    Understanding your insurance contract

    Learn how to read one of the most important documents you own: your insurance contract.
  2. Insurance

    How To Invest In Insurance Companies

    Knowing the special circumstances that insurance companies operate under helps in evaluating whether or not a listed insurance company is a good investment and whether the economic environment ...
  3. Insurance

    The History of Insurance in America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  4. Insurance

    How Much Life Insurance Should You Carry?

    Before purchasing life insurance it is important to decide if you really need it, what type of policy is best, and how much coverage you should get.
  5. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  6. Insurance

    Homeowner's Insurance Guide: A Beginner's Overview

    Everything new homeowners need to know about homeowner's insurance to protect their residence.
  7. Insurance

    Life Insurance: How Long Does It Take To Get Paid?

    How to file for a life insurance payout – and how long it takes to receive it. Plus, new ways to plan for payments that provide an income stream.
  8. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  9. Financial Advisor

    Mutual Vs. Publically Traded Insurance Companies

    Should you buy your insurance policy from a mutual or publically traded insurance company?
  10. Insurance

    12 Car Insurance Cost-Cutters

    Car insurance rates are on the rise. If car insurance costs are dragging you down, use these tips to free yourself from some of the extra weight.
RELATED FAQS
  1. Can my insurance company refuse me coverage?

    Insurance isn't always as straightforward as other products, and insurers can deny coverage in many different instances. Read Answer >>
  2. What is the main business model for insurance companies?

    Read about the most important components of an insurance company business model, such as risk pricing, investing and claims ... Read Answer >>
  3. How much do changes in interest rates affect the profitability of the insurance sector?

    Learn about the relationship between interest rates and insurance company profitability, and how interest rates can affect ... Read Answer >>
  4. Why do insurance policies have deductibles?

    Learn the basic concept of an insurance deductible and why they mitigate moral hazards and provide financial viability to ... Read Answer >>
Hot Definitions
  1. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  2. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  3. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  4. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  5. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  6. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
Trading Center