Slide 1

SUBMITTED TO MISS KAVITABYSHWETA4496

NATURE OF LIFE INSURANCE CONTRACT

MEANING

FEATURES OF LIFE INSURANCE CONTRACTNATURE OF GENERAL CONTRACTAccording to sec2(H) and sec 10 of Indian Contract Act, the valid contract must have the followingINSURABLE INTERESTThe insured must have an insurable interest in the life to be insured for a valid contract.In the absence of an insurable interest, the insurance contract will be a wagering contract which is invalid and unenforceable.Insurable interest can be divided into two categories:

INSURABLE INTEREST

INSURABLE INTEREST IN OWNS LIFE A person has unlimited interest in his own life, there is no need to prove this fact.The loss of life cannot be measured in monetary terms so this loss is unlimited.A person may take insurance policy of any amount but in practical situations the means of the applicant and the circumstances are taken into consideration.INSURABLE INTEREST IN OTHERS LIFEPROOF NOT REQUIREDPROOF IS REQUIREDHusband has insurable interest in the life of wife.Wife has insurable interest in the life of husband.Creditor in the life of debtor.Partners have 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 the Principal.GENERAL RULES FOR INSURABLE INTERESTTIME OF INSURABLE INTEREST: Should be present at the time of proposal.INSURABLE INTEREST MUST BE VALUABLE: It must be determined properly in business relationship. INSURABLE INTEREST SHOULD BE VALID: should not be against public policy

LEGAL RESPONSIBILITY MAY FORM THE BASIS OF INSURABLE INTEREST: for eg- a person under legal responsibility to incur expenses at the funeral of his wife and children, can purchase insurance policy on the lives upto that extent.INSURABLE INTEREST MUST BE DEFINITE: LEGAL CONSEQUENCES: it would be null and void without insurable interest.

PRINCIPLE OF UTMOST GOOD FAITHThe insurer and the insured must be of the same mind at the time of the contract.Both the parties must disclose all the material facts affecting the risk, to each other.The proposer should disclose the material facts which are going to influence the decision of the proposer.MATERIAL FACTS TO BE DISCLOSEDFACTS NOT REQUIRED TO BE DISCLOSEDWARRANTIESThe representations which are contained by the policies and expressly or implictly forming part of the contract are known as warranties.It is a stipulation collateral to the main purpose of the contract.They are the basis of contract between the proposer and insurer.PROXIMATE CAUSEThe efficient or effective cause which causes the loss is called proximate cause.The cause or the reason for the loss must be related to the subject matter of the insurance policy.If the loss is due to some other cause then the insurer can deny to pay the compensation.The principal of proximate cause does not apply in case of life insurance contract.

EXCEPTIONS TO DOCTRINE OF PROXIMATE CAUSEASSIGNMENT AND NOMINATIONA insurance policy can be assigned freely for a legal consideration or love and affection.The notice of assignment must be given to the insurer who will acknowledge the assignment.Once the assignment is completed it cannot be revoked by the assignor.The assignor will receive the amount of policy on its maturity or on the death of the insured, whichever is earlier.The holder of a life insurance policy on his own life can nominate a person to whom the money will be payable in the event of his death.A nomination can be cancelled before maturity.

RETURN OF PREMIUMGenerally premium payable is not returnable but in following cases premium payable is returnable:FOR REASON OF EQUITY: Equity means a condition that the insurer will not receive the price of running the risk he runs. Thus the contract does not come into effect and it is void.BY AGREEMENT IN THE POLICY: The insured may pay full premium while effecting insurance, but it may be agreed to return it wholly or partially on the happening of certain events.

OTHER FEATURESALCATORY CONTRACT: It is a contract depended on chance. In life insurance policy full amount of policy is payable even if all the premium has not been paid.UNILATERAL CONTRACT:Only the insurer makes an enforceable promise. The proposer has already performed his duty of payment of premium.

CONDITIONAL CONTRACT:It is a conditional contract because the insurer shall pay the assured sum only when the contract is continuing by the payment of premium.CONTRACT OF ADHESION: It means that the terms of the contract are not arrived by mutual negotiations between the parties as is done in other contracts. INDEMNITY CONTRACT IS NOT APPLIED:Value of life cannot be measured in monetary terms. Its not possible to ascertain the time upto which the insured would have survived and also the amount of money he would have earned in his life time.Thank you