This document discusses the principles of valid life insurance contracts. It outlines several key elements, including insurable interest which requires that the policy owner has a financial interest in the insured individual's life. It also discusses the principle of utmost good faith which requires high levels of disclosure from the policy owner. Additionally, it explains that life insurance contracts are not contracts of indemnity, unlike most other types of insurance. The document provides an overview of the key features and principles of life insurance.

1. PRINCIPLES OF VALID CONTRACT
- SPECIAL PRINCIPLES OF LIFE
INSURANCE
Presented By ,
ARUNIMA RAJAN
10/28/2014

2. CONTRACT
 In common low legal systems, a contract (or informally
known as an agreement in some jurisdictions) is an
agreement having a lawful object entered into voluntarily
by two or more parties, each of whom intends to create
one or more legal obligations between them.
 The elements of a contract are "offer" and "acceptance"
by "competent persons" having legal capacity who
exchange "consideration" to create "mutuality of
obligation."
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4. ELEMENTS OF CONTRACT
 Agreement
 Consideration
 Legally Competent Parties
 Legal Purpose
 Legal Form
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5. CONTRACT OR AGREEMENT
 Every Agreement Is not a Contract
 A Contract is enforceable by law while an Agreement is
not enforceable by law.
 All Contract are Agreement but all Agreement are not
Contract.
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6. ESSENTIAL OF VALID CONTRACT
Offer and acceptance
 meeting of the mind
 Parties competent to contract
 Lawful Consideration
 Legal formalities
 Free consent
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7. CLASSIFICATION OF CONTRACT
 According to Validity
1. Valid Contact
2. Void Contract
3. Void Agreement
4. Voidable Contract
5. Illegal Agreement
6. Unenforceable Contract
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8. CONTD………..
 According to Formation
1. Express Contract
2. Implied Contract
3. Quasi Contract
 According to Performance
1. Executed Contract
2. Executory Contract
3. Bilateral Contract
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11. LIFE INSURANCE
Life insurance can be termed as an agreement between
the policy owner and the insurer, where the insurer for a
consideration agrees to pay a sum of money upon the
occurrence of the insured individual’s or individuals’
death or other event , such as terminal illness, critical
illness or maturity of the policy.
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12. PRINCIPLES OF LIFE INSURANCE
Special Features of Life Insurance Contracts:-
1. Principles of Insurable Interest
 The object of insurance should be lawful. The person
proposing for insurance must have interest in the
continued life of the insured and would suffer pecuniary
loss if the insured person dies. This is known as
Insurable Interest.
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13. 2. Principles of utmost good faith
 In Life Insurance contracts, a very high degree of good
faith is required to exist between the parties to the
contract, viz., the insurer and the insured. This is called
the principle of utmost good faith.
 It is the duty of the proposer to disclose the material
information for proper assessment of risk by the insurer
 The proposer may not be having technical knowledge
about the insurance products, the benefits, pricing
aspects etc. and hence will have to rely upon the insurer
to ensure that the terms of the contract are fair and
equitable.
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14. 3. Principle of Indemnity
 Insurance contract other than life insurance contract are
contracts of indemnity in the sense that the amount
payable by the insurer in case of the contingency stated
in the policy occurring is limited to the loss that the
insured will suffer.
 Principle of insurable interest determines if a loss is
suffered; the principle of indemnity measures the loss.
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15. 4. Principle of Subrogation
 Substitution of the insurer in place of the insured for
the purpose of claiming indemnity from a third party
wrongdoer for a loss covered by insurance.
 The insurer is entitled only to the amount it has paid
under the policy.
 Subrogation does not apply to Life Insurance and
most individual health insurance contract.
 The insurer cannot Subrogate against its own insured.
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16. INSURANCE CLASSIFICATION
Insurance
Life Insurance General Insurance
Fire Marine Health Auto
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17. TYPES OF LIFE INSURANCE COMPANY
 Terms insurance policy.
 Whole life insurance policy.
 Endowment policy.
 Annuities and pension.
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18. DISTRIBUTION CHANNEL IN LIFE INSURANCE
BUSINESS
Following are the different distribution channel :-
 Agents
 Brokers
 Corporate agents
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19. ROLE OF LIC IN INDIA
The LIC plays an important role in the
development of nation economy. The role of life
insurance corporation involves all the activates relating
to national economy, individuals and society. The
following are the important areas in which LIC plays an
important role:-
 Investment.
 Underwriting.
 Giving loans.
 Social orientation.
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21. LIFE INSURERS
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22. THANK YOU
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