Life Insurance
Since life is uncertain, all individuals try to assure themselves of certain sum of money in the future to take care of unforeseen events or happenings. Individuals in the course of their life rae always exposed to some kind of risks. The risk may be of an event which is certain that is death.
In that case whta will happen to the other members of the family hwo are depndent on a particular individual’s income. The other risk may be of living too long in which an individual may become too old to earn i.e., retirement.
In this case also, the earnings will declline or end. Other such circumstances, individuals seek protection against these risks and life insurance companies offer protection against such risks.
A life insurance policy was introduced as a rpotection against the certainty of life. But gradually its scope has widened and there are various types of insurance policies available to suit the requirements of an individual.
This agreement or contract which contains all the terms and conditions is put in writing and such document is called policy. The person whose life is insured is called the assured. The insurance company is the insurer and the consideration paid by the assured is the premium. Life insurance also encourages savingsas the amount is to be paid regularly.
The general principles discussed in one of my articles apply to life insurance also with a few exceptions. The main elements of life insurancecontract are:
(i) The life insurance contract must have all the essentials of a valid contract. Certain elements like offer and acceptance, free consent, capacityto enter into a contract, lawful object must be present for the contract
to be valid.
(ii) The contract of life insurance is a contrcat of utmost good faith. The assured should be honest and truthful in giving information to the insurance company. He must disclose all material facts about his health to the insurer. It is his duty to disclose aacurately all the material facts known to him even if the insurer does not ask him.
(iii) In life insurance, the insured must have insurable interest in the life of the assured. Without interest the cotract of insurance is void. In case of life insurance, insurable interst must be present at the time the policy is affected. It is not necessary that the assured shoould have insurable intersrt at the time of maturity also.
(iv) Life insurance contract is not a contract of indemnity. The life of a human being can not be compensated and only a specified sum of money is paid. That is why the amount payable in life insurance on the ahppening of an event is fixed in advance. The sum of money payable is fixed, at the time of entering into contract.
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