Life Insurance

Life insurance is a type of insurance in which you make regular payments so that you receive a certain amount of money on the expiry of a certain period, or your dependents will receive a certain amount of money when you die.  

Any person who can enter in to a valid contract is eligible to enter in to a life insurance contract. However, Life insurance policy differs from other forms of insurance policies.

It’s clear that the subject matter of a life insurance is human life and the event insured is death. Therefore, life insurance contact is considered as a valued contract whereas any other form of contract is considered as a contract of indemnity. The Life insurance contract is generally created as a method of protection for the dependents.

However, in the Life insurance, the assured must have insurable interest in the life insured. This insurable interest is arisen from the pecuniary relationship which exists between the assured and the life insured. It simply means, that a person is said to have an insurable interest in life of the person whose life insured, would suffer from financial loss on the death of the insured person. For example, a creditor has an insurable interest in the life of the debtors. On the other hand wife has an insurable interest in the life of her husband as the law presumed that the husband is legally bound to make financial support towards his wife.

But, in the case of relationships other than husband and wife such as father and daughter, mother and son, grand father and grand daughter, the insurable interest in the life of the insured is required to be proved. For example a mother has no insurable interest in the life of her own son if it not proved that she is financially supported by her son or she is dependent on her son.

A person who decides to take a life incurrence policy must fill a proposal form.

He is required to answer the questions in proposal form in good faith. Apart from that, he should disclose all the material facts which influence the insurer in deciding the amount of premium. “Insurance contracts are contracts of utmost good faith”, therefore Life insurance contract also follows the Principle of utmost good faith. 

In the case where a statement in the proposal form is false or there is a non disclosure of a material fact which would affect the judgment of the insurer whether he enters   in to a life insurance contract or not, the insurer can avoid the policy.

However life Insurance contract is a long term contract which enables the insured to terminate the contract on expiry of a certain period and get the surrender value of the policy.