The nature of life insurance contracts ?
The actual form of the life insurance policy has not changed a great deal over the years. The policy is a contract between the policyholder and the company, made on the basis of the proposal form in which the prospective policyholder has to give such information as the company may require (accuracy is essential here if the contract is to be valid). In return for the payment of the specified premiums, the company guarantees to pay the sum assured plus, was relevant, bonuses, to the policyholder at the specified maturity date or on the policyholder’s earlier death.
The difference between life insurance and general (motor, household and other risks) insurance is that, having made the contract, having made the contract, the company is bounded by it and cannot refuse to accept future premiums if, say, the policyholder’s health deteriorates. Life insurance is a long term contract, whereas general insurance is renewable at the option of both parties and the premium rate may be adjusted as the insurer thinks fit.
There are some legal limits on the faculty to be insured. One may insure the life of another person only if he has a financial interest in that person death or survival. This condition used to be applied very strictly, to the extent that a man might not, for example, insure the life of his father. However, this rule is now more liberally interpreted and some offices would allow a man to insure the life of his father to provide for the CCT that would become payable on his father’s death.
Unless some similar financial interest is established, a parent may not insure the life of a child (except under certain industrial assurance policies to provide for funeral expenses), but a lender may insure the life of his debtor, since he stands to suffer a loss if the debtor dies before repaying the loan. One relatively modern innovation in life insurance is the appearance of policies designed with women. The bulk of traditional life insurance policies were designed with the male breadwinner in mind.
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