Life Insurance is a contract between an individual and Insurance Company, in which the Insurance company provides financial security in return of premium, in case of death or maturity of the policy.
There is no statutory definition of life Insurance, However, it may be defined as a contract in which the insurer, in consideration of a certain premium.
Either in lump-sum or in any other other periodical payment in return agrees to pay the Insured the person for whose benefit the policy is taken. A estimate sum of money on the happening on a particular event contingent or duration of human.
Dalby V/s India & London Assurance company, life insurance
It was held that the following are the features of life insurance are as Life Insurance Contract :-
- It relates to human life
- There need not be an express provision that the payment is due on the death the person.
- The contract provides for the payment of lump-Sum money,
- The amount is paid at the expiration of a certain period or on the death of the Insured.
Objectives of life Insurance
It has both short term and long term benefits or advantages are:
Short Term Advantages of lif insurance
- Encourage the habit of savings,
- It forms the capital which will helps in future,
- Secures the Insured in case of sudden death,
- It also looks after the family members in case Sudden death.
Long Term Advantages of lif insurance
- It promotes the growth of Industries as a huge amount collected by the Insurance companies will be used for investments.
- It also helps in development of an Economy.
Difference between Life insurance & General Insurance
Primary difference between lifee Insurance and General Insurance is the subject matter of Insurance.
In lifee Insurance the subject matter is the human life, which is beyond economic value it is only a juridical valuation and therefore it is invaluable in terms of money.
General Insurance the subject matter has an “economic value,” In General Insurance the event insured against “may or may not happen” it says a “Contract of Indemnity.
Lifee Insurance the event insured against is the “Life or death” which is certain it is not considered as Contract of Indemnity Life.
Godsall v/s Boldero, life insurance case
It was held that lifee Insurance is also a Contract of Indemnity, But later on in, Dalby v/s Indian & London Assurance Company.
It was held that lifee Insurance is not a “Contract f Indemnity” in strict sense, A human life cannot monetary terms, The loss by death is beyond estimation.
In lifee Insurance, the sum assured becomes payable in full “without proof of loss” It is not strictly indemnity Contract.
In General Insurance, there must be an estimation of loss” which is to be payable to the insured.
Lifee Insurance, Insurable interest is “at the time” of Commencement of the contract as life of a person is incapable of valuation in term of money.
General Insurance Contract the Insurable interest must exist ” even before the Commencement of the contracts and during the “loss.”
Circumstances Affecting the Risk of Life Insurance
“More premium more risk” In this heading we understand what are the circumstances which directly affect the life of the insured Lifee insurance contract life is at risk.
Therefore, the more risk to the life will result in higher premium, Some of the circumstances are as follows:
Age affecting the risk of lif insurance
- The primary factor influencing the life Insurance risk is the age of policy holder.
- From the perspective of Insurer, a young individual higher chance of continuing the life Insurance policy for years to come.
- He” or she” is also less likely to suffer from age related disease and pass away pre-maturity,
- It also affects the premium furnished by the policy holder.
Gender affecting the risk of lif insurance
Another factor that determines and affects the risk is gender of policy holder. It is based on scientific and statical evidence which shows that women are likely to live an average of 5 years or more than men.
Medical Records affecting the risk of life insurance
Lifee Insurance policy Comes with an under writing process that includes conducting a through medical examination of the policy.
The finding of this medical examination shows the status of physical health of the policy holder and provide an anticipation regarding potential illness.
The policy holder might contract in future, therefore medical records are results, they play an important role in determining the premium.
Family History affecting the risk of life insurance
- It is widely diseases known as diseases are considered inheriting which means that they have a tendency to run in the Family.
- Other types of diseases might not be considered inheritance, but might have a higher chance of affecting member of a family due to common life style choice’s.
- All these risk are reflected in family medical history and play an important role in determining the risk.
Tobacco Use affecting the risk of lif insurance
- An important factor that most people might not consider when thinking about life insurance is smoking habit of an individual.
- According to research people who smoke are more likely to contact various illness and have higher mortality rate as well.
- Therefore, premiums for smokers reflect these risk factors and tend to be higher than for their non smoker counter part.
Individual Policy affecting the risk of lif insurance
A major factor in life insurance premium is the Insurer from whom and the type of policy one opt to avail, It also determines the amount of premium and risk covered there under.