Life Insurance

PUTTU GURU PRASAD

INC GUNTUR
 Definition and meaning

• It is a contract by which the insurer undertakes to pay to the

person for whose benefit the insurance is made, a certain sum
of money on the death of a person whose life is insured, or on
expiry of a certain period.
• This promise is made for a consideration of a certain premium
either in a gross sum or by periodical payments, whichever is
earlier.
• In case of death, the payment will be made to the legal
representatives and in case payment is made after the expiry
of a certain period, then it will be to the person who has
insured.
( Maturity of the policy).
 Life Insurance contract not a contract of
indemnity

• It is not considered to be a contract of indemnity, because

human life is incapable of being measured in terms of money.
• In case of life insurance, the happening of the event is certain,
but the time is uncertain, whereas in other insurances, the
event by itself is uncertain like the contingency of perils of
marine and fire may or may not happen.
• Because of the above reason, the amount paid as a premium is
paid back either after death or on maturity, whereas in other
insurances nothing is paid if the risk that is insured does not
happen.
Insurable interest in life insurance

• Insurable interest is a prerequisite for the life insurance

contracts while entering into contract. In the absence of
insurable interest, the contract is void as a wager.
• Anyone who has a pecuniary claim against the other, or a legal
right to support from him, has an insurable interest in the life of
the other. This rule is applicable to life insurance only, as it is
not a contract of indemnity.
• E.g.. A child who is dependent upon his father or mother has an
insurable interest in the life of his father.
• In case of life insurance, the insurable interest has to exist at
the time of entering into a contract, and it may not be important
that the insured or assured had the insurable interest at the
time when the policy falls due.
Insurable Interest Certain Examples

• One’s own life- To an unlimited extent one has an insurable

interest in his or her own life.
• Husband and wife- It is approved by law that there is insurable
interest in the life of one’s spouse. In this relationship, even in
absence of pecuniary interest there can be an interest. But in
other relationships such as , parents, brother, sister etc.. the
law expects that the monetary dependency or support has to be
proved.
• The other relationships accepted by law are creditor, debtors,
partners, a trustee in the life of beneficiary, a servant in the life
of the master and vice versa..
Life Insurance Policy (General Terms and
Conditions)

• Name of the plan governing the policy.

• What kind of a policy is it, participating in profits, bonus
etc?
• Contingencies for making the payments.
• The date of commencement and maturity.
• The provisions of nominations, assignment, loans as
security etc…
• Any other special clauses like suicide, first pregnancy
clause etc..
• Existence of insurance ombudsman, redressal
mechanism, review committees etc…
• The complete address of the insurer as well as the
insured.