1. Shri Shivaji Law College, Parbhani (Maharashtra)
Life Insurance By
Waseem I. Khan
Assistant Professor
Shri Shivaji Law College, Parbhani (Maharashtra)

2. Introduction
“If a child, a spouse, a life partner, or a parent depends on you and your income, you need life insurance.”
The whole idea of insurance has developed on the fact that human life is full of uncertainties and the life of a person itself is very uncertain.
The scheme of life insurance provides an assurance that if such an event happens, the person or his dependents would get financial assistance to bear the loss.

3. Meaning of Life Insurance
In simple words, it means an agreement in which one party agrees to pay a given sum of money upon the happening of a particular event contingent upon duration of human life in exchange of the payment of a consideration.
The person who guarantees the payment is called Insurer.
The amount given is called Policy Amount.
The person on whose life the payment is guaranteed is called Insured or Assured.
The particular event on which the payment is guaranteed to be given may be Death or Life.
The consideration is called the Premium.
The document evidencing the contract is called Policy.

4. Definition of Life Insurance
“Life insurance is a contract in which one party agrees to pay a given sum of money upon the happening of a particular event contingent upon the duration of human life in consideration of immediate payment of a smaller sum or other equivalent periodical payments by the other.”
“A life insurance policy promises that the insurer will pay to the policy holder a certain sum of money if the person insured dies or any other specified contingency happens.”

5. Nature of Life Insurance Contract
i) Unilateral Contract.
only one party to the contract makes legally enforceable promise.
The insurer can repudiate the contract of payment of full policy, but he cannot compel the insured to pay the subsequent premiums.
On the other hand, if the insured continues to pay the premium, the insurer has to accept them and continue the contract.
ii) Conditional Contract.
Life insurance is subject to the conditions and privilege provided on the back of the policy.
The conditions whether precedent or subsequent of the legal rights must be fulfilled in order to complete the contract.

6. Nature of Life Insurance Contract
iii) Aleatory Contract.
In such a kind of contract, no mutual exchange of equal monetary value is done.
It is the happening of the contingency on which the payment is made.
The happening is a matter of chance which may occur or not.
If death occurs only after payment of a few premiums, full policy amount is paid.
iv) Contract of Adhesion.
In such a contract, the terms of the contract are not arrived at by mutual negotiations.
Similarly, in a life insurance contract, the contract is decided upon by the insurer only.
The party on the other side has to choose between the two options, i.e. either to accept or reject the policy.

7. Nature of Life Insurance Contract
v) Contract of Certain Amount.
Life insurance contract does not provide an indemnity.
It is in the nature of a contingency contract by providing for the payment of the agreed amount on the happening of the event.
vi) Standard Form of Contract.
In the life insurance, all the essentials of a general contract as provided by the Indian Contract Act, 1872, for a valid contract are present.

8. Kinds of Life Insurance
Term Policy.
It provides a risk cover only for a prescribed period.
Usually these policies are short-term plans and the term ranges from one year onwards.
If the policyholder survives till the end of this period, the risk cover lapses and no insurance benefit payment is made to him.
The amount of premium to be paid for these policies is lower than all other life insurance policies.
It has no surrender value.
This plan is most suitable for those who are initially unable to pay high premium.

9. Kinds of Life Insurance
II) Whole Life Policy.
This policy runs for the whole life of the assured.
The sum assured becomes payable to the legal heir only after the death of the assured.
The whole life policy can be of three types.
Ordinary whole life policy.
In this case premium is payable periodically throughout the life of the assured.
b) Limited payment whole life policy.
In this case premium is payable for a specified period (Say 20 Years or 25 Years) Only.
c) Single Premium whole life policy.
In this type of policy the entire premium is payable in one single payment.

10. Kinds of Life Insurance
III) Endowment Life Policy.
In this policy the insurer agrees to pay the assured or his nominees a specified sum of money on his death or on the maturity of the policy which ever is earlier.
The premium for endowment policy is comparatively higher than that of the whole life policy.
The premium is payable till the maturity of the policy or until the death of the assured which ever is earlier.
It provides protection to the family against the untimely death of the assured.

11. Kinds of Life Insurance
IV) Joint Life Policy.
This policy is taken on the lives of two or more persons simultaneously.
Under this policy the sum assured becomes payable on the death of any one of those who have taken the joint life policy.
The sum assured will be paid to the survivor(s).
For example, a joint life policy may be taken on the lives of husband and wife, sum assured will be payable to the survivor on the death of the spouse.

12. Kinds of Life Insurance
V) With profit and without profit policy.
Under with profit policy the assured is paid, in addition to the sum assured, a share in the profits of the insurer in the form of bonus.
Without profit policy is a policy under which the assured does not get any share in the profits earned by the insurer and gets only the sum assured on the maturity of the policy.
VI) Double accident benefit policy.
This policy provides that if the insured person dies of any accident, his beneficiaries will get double the amount of the sum assured.

13. Kinds of Life Insurance
VII) Annuity policy.
Under this policy, the sum assured is payable not in one lump sum payment but in monthly, quarterly and half-yearly or yearly installments after the assured attains a certain age.
This policy is useful to those who want to have a regular income after the expiry of a certain period e.g. after retirement.
Annuity is paid so long as the assured survives.
VIII) Policies for women.
Jeevan Sathi Policy.
Jeevan Sathi is also known a Life Partner plan where the husband and wife.
On maturity, provided both are alive, full sum assured with bonus is paid.
On the death of one of the assured during the period of the policy, basic sum assured is paid to the surviving partner, who is not required to pay any further premiums.

14. Kinds of Life Insurance
IX) Group insurance.
Group life insurance is a plan of insurance under which the lives of many persons are covered under one life insurance policy.
Usually, in group insurance, the employer secures a group policy for the benefit of his employees.
Insurer provides coverage for many people under single contract.
X) Policies for children.
Marriage endowment and educational annuity plans.

15. Circumstances Affecting the Risk
Matters affecting the risk.
Risk in life insurance is the risk of death at an early date due to disease as distinguished from accident.
Hence in life insurance facts which tend to shorten the span of the life of assured would amount to the circumstances affecting the risk and those facts are regarded as the material facts for purposes of the duty to disclose.
It is common practice for the insurer to put specific questions in the proposal form about these facts.

16. Circumstances Affecting the Risk
Age of the proponent.
Age is an important material fact in the life insurance as the rate of premium depends on the age of the insured.

17. Circumstances Affecting the Risk
Family history.
The risk in life policies depends on longevity of the assured and heredity throws sufficient light and plays an important role in the determination of the probable longevity of a person.
Therefore medical officers usually put a number of questions about the birth and death of brother, sister, parent and near relations, the disease from which they suffer then or suffered in the past.
Insanity of the near relatives is one of the things to be revealed.

18. Circumstances Affecting the Risk
Personal health.
The present state of health is material because no prudent insurer would underwrite the life of a person afflicted with a fatal disease or who is one on a death bed.

19. Circumstances Affecting the Risk
Geographical position.
The place where the applicant lives an important, as climate and environment have an appreciable effect on the health.
Unhealthy surrounding have a tendency to shorten the life.
Further particular place may be subject to earthquake volcanoes and floods.
Therefore applicant must give his residential address.

20. Circumstances Affecting the Risk
e. Occupation.
If it is dangerous occupation like soldier, sailor, airman or a workmen in an ammunition factory the insurer charge a higher rate of premium.

21. Circumstances Affecting the Risk
f. Habits in life
The habits of life past and present which tend to shorten the life must be disclosed e. g. the use of opium, tobacco or alcohol.

22. Principles of Life Insurance
Insurable interest
According to Patterson insurable interest is a relation between the insured and the event insured against so that occurrence of the event would result in substantial loss or injury of some kind to the insured.
The insured must be benefited by the safety of the subject – matter and suffers loss if the subject – matter is lost, damaged or destroyed;
‘Interest’ means ‘if the event happens, the party will gain advantage, if it is frustrated, he will suffer a loss’.

23. Principles of Life Insurance
Insurable interest
In life policies, the following persons have been recognized as having insurable interest and they may conveniently be considered under two main headings, namely:
(a) Blood Relationships.
Contractual Relationship.
(a) Blood Relationship:
This may be discussed under the following heads:-
On one’s Own Life
(ii) Husband or Wife.
This is an exception to the general rule that insurable interest means pecuniary interest or an interest which is capable of being expressed in terms of money.
Policy take during marriage, it continues after dissolution also.
Policy on the life of fiancée, on the life of divorced wife.

24. Principles of Life Insurance
(iii) Parent and Child
Presumably, the parent child relationship arising from the ties of blood is the strongest one of all.
No relationship is more sacred and binding than that of parent and child.
These ties uniting the parent and child are so strong that this type of relationship is enough to presume insurable interest in the life of each other.

25. Principles of Life Insurance
Contractual Relationship
A wide variety of relations may acquire insurable interest by reason of contractual relationship. Some of them are noted hereunder.
Debtor and Creditor
Partner and Co-partner
Principal and Agent
Trustee and Co-trustee

26. Principles of Life Insurance
Utmost good faith.
Insurance companies fix the premium on the basis of the average rates of mortality.
Every facts which shorten the life of the insured is material.
Information relating to age, health and disease, habits, family history, nature of business or profession.

27. Settlement of Claim
The easy and timely settlement of a valid claim is an important function of an insurance company.
The measure to judge insurance company’s efficiency is as to how quick the claim settlement is.
The speed, kindness and fairness with which an insurer handles claims show the maturity of the company and may lead to great satisfaction of the client.
It is the liability of the insurance company to honour valid and legal claims.
At the same the company must identify the fraudulent and invalid claims.
A claim may arise:
i) On death of Policyholder before the maturity date.
ii) On maturity, i.e. after expiry of the endowment period specified in the policy contract when the policy money becomes payable.

28. Settlement of Claim Death claims Intimation of death
The death of the life assured has to be intimated in writing to the insurer.
It can be done by the Assignee or nominee under the policy or from a person representing such Assignee or Nominee or when there is no nomination or assignment by a relative of the life assured, the employer, the agent or the development officer.
Where policy is assigned to a creditor or a bank for valuable consideration, intimation of death may be received from such assignee.
The intimation of the death of the life assured by the claimant should contain the following particulars:
(1) his or her relationship with the deceased,
(2) the name of the policyholder,
(3) the number/s of the policy/policies,
(4) the date of death
(5) the cause of death and
(6) sum assured etc.

29. Settlement of Claim II. Proof of death and other documents
In case of claim by death, after the receiving the intimation of death the insurance company ensures that the insurance policy has been in force for the sum assured on the date of death and the intimation has been received from assignee, nominee or other claimant.
The following documents are required:
(i) Certificate of death.
(ii) Proof of age of the life assured (if not already given).
(iii) Deeds of assignment / reassignments.
(iv) Policy document.
(v) Form of discharge.

30. Settlement of Claim
If the claim has accrued within three years from the beginning of the policy, the following additional requirements may be called for:
(i) Statement from the hospital if the deceased had been admitted to hospital.
(ii) Certificate of medical attendant of the deceased giving details of his/her last illness.
(iii) Certificate of cremation or burial to be given by a person of known character and responsibility present at the cremation or burial of the body of the deceased.
Certificate by employer if the deceased was an employee.
In case of an air crash the certificate from the airline authorities would be necessary certifying that the assured was a passenger on the plane.
In case of ship accident a certified extract from the logbook of the ship is required.
If the life assured had a death due to accident, suicide or unknown cause the police inquest report, panchanama, post mortem report, etc would be required.

31. Settlement of Claim Maturity claims
If the life insured survives to the full term, then basic sum assured is payable.
This payment by the insurer to the insured on the date of maturity is called maturity payment.
The amount payable at the time of the maturity includes a sum assured and bonus/incentives.
The insurer sends in advance the intimation to the insured with a blank discharge form for filling various details in it.
It is to be returned to the office along with
Original Policy document
Age proof if age is not already submitted
Assignment /reassignment, if any. .

32. Settlement of Claim Procedure of the maturity claims
After receipt of completed and stamped discharge form from the person entitled to the policy money along with policy documents, claim amount will be paid by account payee cheque.
If the life assured is reported to have died after the date of maturity but before the receipt is discharged, the claim is to be treated as the maturity claim and paid to the legal heirs.
In this case death certificate and evidence of title is required.
Where the assured is known to be mentally deranged, a certificate from the court of law under the Indian Lunacy Act appointing a person to act as guardian to manage the properties of the lunatic should be called.

33. Settlement of Claim Additional benefits apart from regular claims
Double Accident Benefit:
Normally for claiming this benefit documents like FIR, Post-mortem Report are required.
Disability Benefit Claims
Waiver of all premiums to be paid in future till the expiry of the policy of the life assured if a person is totally and permanently disabled and cannot earn any wage/compensation/profit as a result of the accident.