Life insurance In Indian Insurance

1. Life Insurance
Shreyas Vyas(Ph.D. in Law)
Faculty
NISM

2. Concept
• Life insurance is a contract with between an individual and an insurance
company, in which the insurance company provides financial security in
return for regular payments (known as premiums) to the insurance
company.
• In case of the policyholder’s death or if the policy matures, the
insurance company shall pay a lump sum to the individual after some
time or to their family, on basis of the contract. Typically, this type of
policy is chosen based on your needs and goals.

3. • There is no statutory definition of life insurance. However, it is defined as
a ‘Contract in which the insurer, in consideration of a certain premium,
either in a lump sum or in any other periodical payments, in return
agrees to pay to the assured, or to the person for whose benefit the
policy is taken, a stated sum of money on the happening of a particular
event contingent on duration of human life’
• In Dalby v. The Indian & London Assurance Co the essential features Life
Insurance have been stressed upon. Accordingly, it is
It is a contract relating to human life
There need not be an express provision that the payment is due on the
death of the person
The contract provides for payment of lump sum money
The amount is paid at the expiration of a certain period or on the death
of the person

4. • A contract of life insurance, as in other forms of insurance, requires that the assured must have
at the time of the contract an insurable interest in his life upon which the insurance is affected.
Insurable interest has only to be proved at the date of the contract of life insurance, and not
necessarily present at the time when the policy falls due.
• A contract of life insurance, as in other forms of insurance, requires that the assured must have
at the time of the contract an insurable interest in his life upon which the insurance is
affected.Insurable interest has only to be proved at the date of the contract of life insurance,
and not necessarily present at the time when the policy falls due.
• A person can assure in his own life and every part of it, and can insure for any sum whatsoever,
as he likes. Similarly, a wife has an insurable interest in her husband and vice-versa. However,
mere natural love and affection is not sufficient to constitute an insurable interest. It must be
shown that the person affecting an assurance on the life of another is so related to that other
person as to have a claim of support.
• For example, a sister has an insurable interest in the life of a brother who supports her.
• Even a person not related to the other can have insurable interest on that other person.
• For example- a creditor has insurable interest in the life of his debtor to the extent of the debt.

5. Characteristics of Life Insurance
• It is a contract between the insurer and insured.
• Insurance of human hazards is covered by life insurance policy.
• It is a promise to pay the money insured in consideration to a premium.
• The insurance premium is sometimes paid at a lump sum together or
periodically.
• A default in remitting the premium may cause discharge of the insurance
contract and the insurer shall be relieved from his liability.
• The money insured is paid by the insurer to the insured or assignee on
happening of the event specified in the policy.
• The proposal for affecting an insurance policy is executed in the prescribed
form.
• The policy is signed by the insurer only.

6. Difference b/w Life Ins & other Insurances
• Primary distinction between the two is the subject-matter of insurance.
In case of Life Insurance, the subject matter is the human life which has
no economic value. It is only a juridical valuation & hence it is invaluable
in terms of money.
• Further, the event insured is the life or death which is certain.
• In Fire & Marine insurances the subject-matter has an economic value.
The event insured against may not happen at all.
• In life insurance as held by Lord Mansfield in Godsall vs. Boldcro that
‘Life Ins is also contract of indemnity’.
• Later in Dalby Vs The Indian & London Assurance Co, it was criticised
and held that it is not a contract of indemnity in the strict sense. As
human life cannot be estimated. It is incapable of exact estimation (i.e.
loss by death).

7. • A person takes policy for a value that is as per his capacity to pay
premium. It is a contract with reference to one’s own life hence not an
indemnity contract. But if policy is taken on other’s life it becomes an
indemnity contract.
• For e.g. creditor can take policy on the life of debtor for recovery of his
loan amount.
• In case of life insurance, the sum assured becomes payable in full
without proof of loss.
• It is not strictly an indemnity contract. The event insured is the death,
which is certain and bound to happen sooner or later, but there is an
uncertainty as regards time of it’s happening.

8. • Insurable Interest is required only at the time of commencement of the
contract, as the life of person is incapable of valuation in terms of money. There
is no question of over valuation. It ranges to whole life of assured as it is a long-
term contract.
• Premium may be paid at regular intervals as agreed by the parties.
• Amount of damage depends on actual loss suffered by the assured. In case of a
strict contract of indemnity he cannot recover more than the actual loss. But
here since the life cannot be valued, it is not a contract of indemnity in the
strict sense. Further the event insured may not happen at all in other kinds of
insurances.
• Insurable interest in case of Fire & Marine insurances should be there even
during loss, as it is capable of valuation. In case of gross over valuation the
policy becomes void as it would become a wagering agreement.
• Insurances other than life would be for a short term, usually for an year or
couple of years and the same can be renewed just like a railway ticket which
could be extended or renewed by payment of extra premium.

9. • The event which is insured in case of life insurance is the ‘Death’. Death
may be due to
Natural reasons;
Disease;
Accident; or
The criminal act of III party
• Technically if the provisions of sec 10 of the Indian Contract Act are
complied it would be a good contract and hence becomes enforceable.
But if death occurs by willful misconduct for e.g. after the
commencement of insurance if the assured is killed, it may be avoided.