Basic Concepts, Features, and Elements of a Life Insurance Contract


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A life insurance policy is built on a few basic tenets.

These ideas include:

  1. Requirements for a Valid Contract

The life insurance policy must meet all legal contract requirements.

The Indian Contract Act of 1872 states that a legitimate contract must include the following elements:

(ii) The acceptance of an offer.

(ii) The ability to contract is (ii).

(iii) Parties’ unrestricted consent.

(iv) Accepting an object lawfully.

(v) Contracts that haven’t been expressly ruled invalid.

  1. Maximum Good Faith

A contract for life insurance is one that is made in the best possible faith. When providing the insurance provider with information, the insured should be truthful and honest. He is more knowledgeable than the other party regarding the contract’s issue (the insurer).

As a result, he has a responsibility to inform the insurer of all relevant information that he is aware of. Any fact that is concealed entitles the insurance to deny the assured of the contract’s benefits.

  1. Interest That Is Insurable

The insured in a life insurance policy must have an insurable stake in the life being insured. The insurance contract is null and void if there is no insurable interest. Insurable interest must exist at the moment the insurance is affected in the case of life insurance. It’s not required that the guaranteed likewise have insurable interest when it reaches maturity.

In the following three situations, insurable interest is assumed and no supporting evidence is required, namely:

(i) Own life 

(ii) Husband’s role in wife’s life, and

(iii) The wife in the husband’s life.

It has been determined that the following people have insurable interests:

(i) A person is assumed to be interested in his or her own life and all of its aspects.

(ii) A creditor has a life insurance policy covering the debtor,

(iii) A drama company owner has an insurmountable stake in the lives of actresses.

(iv) A worker hired for a set period of time has an insurable interest in the survival of his employer.

  1. An indemnity agreement:

A life insurance policy is not an indemnity agreement. Only a set amount of money is paid in lieu of compensation for a life lost. Because of this, the life insurance payment amount is predetermined in advance. The “sum of money” due is constant and unchanging once it has been determined. Therefore, an insurance policy is not an indemnification agreement.

The loss resulting from the death of life assured cannot be estimated in terms of money and only a fixed amount is paid.

The loss resulting from the death of life assured cannot be estimated in terms of money and only a fixed amount is paid.

To put a life insurance policy into effect, several steps are needed.

They are as follows:

a. Suggestion:

It is vital to obtain a free proposal from the Life Insurance Corporation before purchasing a life insurance policy. This form is also provided by agents. The form asks a lot of questions regarding the applicant’s health, family history, and preferred method of premium payment.

As far as we are aware, the insurance arrangement is based on absolute good faith. Therefore, the proposer must accurately respond to each inquiry. He shouldn’t withhold any relevant facts. The insurer will have the right to deny the guaranteed of the benefits of the contract if any fact is concealed.

b. Health Assessment:

A medical checkup for the insured person is scheduled following the submission of the proposal form. Only a doctor who has been approved by the insurance provider may do such an examination. The doctor sends the applicant’s medical report right away to the company’s office.

c. Approval of the Proposal:

The proposal form, a medical report, and insurance agent feedback are delivered to the company. The company reviews the proposal form, and if it is satisfied, it accepts the proposal.

d. Age Verification

The applicant must provide the insurance company with adequate proof of his age.

Any of the following methods can be used to provide age proof:(i)

 (i) A birth certificate from the local registry

(ii) A high school diploma.

c. Approval of the Proposal:

The proposal form, a medical report, and insurance agent feedback are delivered to the company. The company reviews the proposal form, and if it is satisfied, it accepts the proposal.

d. Age Verification

The applicant must provide the insurance company with adequate proof of his age.

Any of the following methods can be used to provide age proof:

I A birth certificate from the local registry

(ii) A high school diploma.

(iii) The assured’s horoscope

Service Manual

(v) A certificate pertaining to the Christian practise of baptism.

e. High-end:

The applicant is informed when the proposal is accepted and is then required to pay the premium. The policy becomes active upon payment of the premium, at which point the risk is covered.

f. Policy of Insurance:

The insurance firm creates the insurance policy after receiving the first premium instalment. The agreement between the insurance company and the assured to pay a specific amount of money to the assured upon the occurrence of the event specified in the policy is the form of the policy.

It is signed by representatives of the insurance firm. When the policy is prepared, registered mail is used to deliver it to the assured. It includes the name, address, occupation, age, insurance amount, number of instalments, premium amount, and premium due date of the assureds.

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