Life insurance

DEFINITION Life insurance is the business effecting contracts of insurance upon human life including any contracts whereby the payment of money is assured on death except death by accident on the happening of any contingency dependent on human life and any contract which is subject to the payment of premium for a term dependent on human life.

CharacterIstics of Life Insurance :- Outcome of contract Payment of premium Payment of sum assured Insurable interest Not a contract of indemnity Related risks to life Financial help Encouraging savings

Nature of Life Insurance:- 1) Economic nature of life insurance:- A family need food, shelter, clothing are met out of the current income. The current income of everybody depend upon the earning they make. A person may reach an age when he can’t earn.

The insured savings will help in meeting the necessaries. Money received against the insurance policy also provide a source of income.

2) Legal Nature of Life Insurance As per Life Insurance Act, Life Insurance is the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is insured on death or the happening of any contingent dependent on human life and any contract which is subject to the payment of premium for a term dependent on human life.

Procedure for Taking Life Insurance:- Filling of proposal form Proof of age Medical examination Agents report Acceptance of proposal Payment of premium Issue of policy

Uses of Life Insurance Provides protection for family Encourages savings Provides channels for investment Eliminates dependency Help in capital formation Loans against policy Provides liquidity Helpful for partnership concern

Nature of General Contracts:- Agreement Competency of the parties Free consent of the parties Legal consideration Legal object

Insurable Interest:- proof not required Proof required Insurable interest in own’s life Insurable interest in other’s life proof not required Proof required

When proof not required :- In the following cases, no proof is required: Husband has insurable interest in the life of wife Wife has insurable interest in the life of husband

When proof is required:- In the following cases, proof is required: Business relationship: Creditor in the life debtors Partners has insurable interest in the life of each partner Employee has interest in the life of key-man Surety has insurable interest in the life of principle 2) Family relationship

General Rules for Insurable Interest Time of insurable interest Insurable interest must be valuable Services Insurable interest should be valid Legal responsibility may from the basis of insurable interest Insurable interest must be definite Legal consequences

Principal of Utmost Good Faith Life insurance required that the principal of utmost good faith should be preserved by both the parties to the contract, insurer and insured. Both the parties must be of same mind and disclose all the material fact affecting risk to each other.

WARRANTIES The representations which are contain by the policies, expressly or implicitly forming the part of the contract is non as warranties. Two types of warranties are- Informatory Promissory

Proximate Cause The efficient or effective cause which causes the loss is called proximate cause. The doctrine of proximate cause is not applicable in life insurance cases except the following – War risk Suicide Accident benefit

Return of Premium Generally, the premium paid is not returned but in the following cases, premium is returned- For reason of equity By agreement in the policy

Other Features Alcatory contract Unilateral contract Conditional contract Contract of adhesion Indemnity contract is not applied Loan against policy Provide liquidity Tax concern

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