LIFE INSURANCE

• LIFE INSURANCE
  INSURANCE
• SHASHI AGGARWAL ECONOMICS AND LAWS CLASSES
• INTRODUCTION

1. THE CONTRACT OF LIFE INSURANCE ARE GOVERNED BY THE INSURANCE ACT 1938 AND LIFE INSURANCE CORPORATIONS ACT 1956
2. WAS NATIONALIZED IN 1956
3. LIFE INSURANCE CONTRACT:IS A CONTRACT BY WHICH THE INSURER IN CONSIDERATION OF THE PAYMENT OF CERTAIN SUM CALLED PREMIUMS UNDERTAKES TO PAY A CERTAIN SUM OF MONEY ON THE DEATH OF A PERSON WHOSE LIFE IS INSURED OR ON THE EXPIRY OF CERTAIN PERIOD,WHICH EVER IS EARLIER. THE PREMIUM MAY BE PAID IN A LUMP SUM OR BY PERIODICAL INSTALMENTS
4. IS A CONTRACT OF UBERRIMAE FIDEI AND THEREFORE FULL DISCLOSURE MUST BE MADE TO THE INSURER OF EVERY MATERIAL CIRCUMSTANCES WHICH IS KNOWN TO THE ASSURED.

• INSURANCE AND ASSURANCE
• ASSURANCE IS USED FOR THE LIFE INSURANCE
• INSURANCE IS USED FOR OTHER TYPES OF INSURANCE FIRE,MARINE,BURGLARY ETC
• NOW THE TERM INSURANCE IS INTERCHANGEABLY USED FOR LIFE INSURANCE AND OTHER TYPES OF INSURANCE
• DIFFERENCE BETWEEN LIFE INSURANCE AND FIRE AND MARINE INSURANCE
• CERTAINTY OF EVENT :

a)    IN CASE OF FIRE AND MARINE INSURANCE THE EVENT INSURED MAY OR MAY NOT HAPPEN AT ALL

b)    BUT IN CASE OF LIFE INSURANCE EVENT IS BOUND TO HAPPEN SOONER OR LATER

• INDEMNITY :

1. THE CONTRACT OF FIRE AND MARINE INSURANCE IS A CONTRACT OF INDEMNITY AND THE INSURED CAN ON THE HAPPENING OF THE EVENT RECOVER THE AMOUNT OF ACTUAL LOSS
2. BUT A CONTRACT OF LIFE INSURANCE IS ON THE OTHER HAND IS NOT  A CONTRACT OF INDEMNITY. SUM ASSURED IS PAYABLE IRRESPECTIVE OF ANY PROOF OF LOSS AND TO THE FULL EXTENT.AMOUNT IS FIXED IN ADVANCE FOR TH REASON OF DEATH OF PERSON CANNOT BE EVALUATED IN TERMS OF MONEY

• VALUATION OF INSURABLE INTEREST 

a)    IN CASE OF FIRE AND MARINE INSURANCE THE INSURABLE INTEREST OF THE ASSURED MUST BE CAPABLE OF EVALUATION IN TERMS OF MONEY.

b)    BUT IN CASE OF LIFE INSURANCE IT IS NOT JUST POSSIBLE

• TIME OF INSURABLE INTEREST :

1. THE CONTRACT OF FIRE INSURANCE IS MUST BE PRESENT BOTH AT THE TIME OF THE INSURANCE AND AT THE TIME OF LOSS BUT IN CASE OF MARINE INSURANCE AT THE TIME OF THE LOSS
2. BUT A CONTRACT OF LIFE INSURANCE IS IT MUST EXIST AT TIME OF THE CONTRACT , NEED NOT PRESENT AT THE TIME OF POLICY DUE

• DURATION OF THE CONTRACT OF INSURANCE

a)    IN CASE OF FIRE INSURANCE IS A CONTRACT FROM YEAR TO YEAR AND IT COMES TO AN END OF THE YEAR. AND MARINE INSURANCE PARTICULAR VOYAGE OR PARTICULAR PERIOD.

b)    IN CASE OF LIFE INSURANCE IT IS CONTINUING CONTRACT AND IT LAPSES IF THE PREMIUM IS NOT PAID AT THE SPECIFIED TIME

• INSURABLE INTEREST

1. THE ASSURED MUST HAVE INSURABLE INTEREST IN THE LIFE INSURED OTHERWISE THE CONTRACT OF INSURANCE IS VOID.
2. A PERSON HAS INSURABLE INTEREST IN THE LIFE OF ANOTHER IF HE WILL SUSTAIN SOME PECUNIARY LOSS ON THE DEATH OF THE PERSON WHOSE LIFE IS INSURED
3. MUST EXIST AT THE TIME OF CONTRACT
4. THE POLICY DOES NOT BECOME VOID IF THE INSURABLE INTEREST CEASES TO BE PRESENT AT THE TIME OF THE DEATH OF THE PERSON INSURED OR WHEN THE POLICY FALLS DUE.

• THREE CASES IN WHICH INSURABLE INTEREST IS RESUMED:

1. IN HIS OWN LIFE UP TO ANY AMOUNT
2. A HUSBAND IN THE LIFE OF HIS WIFE OR VICE VERSA
3. A PERSON IS DEEMED TO HAVE INSURABLE INTEREST IN THE LIVES OF THOSE WHO ARE DEPENDENT UPON HIM

• INSURABLE INTEREST
• THE FOLLOWING PERSONS HAVE BEEN HELD TO HAVE INSURABLE INTEREST:-

1. A PERSON HAS INSURABLE INTEREST IN THE LIFE OF RELATIVE BY WHOM HE IS SUPPORTED
2. A PROPRIETOR OF A DRAMATIC COMPANY HAS INSURABLE INTEREST IN THE LIVES OF ACTORS AND ACTRESS ENGAGED BY HIM. LIKE WISE A SERVANT ENGAGED FOR A TERM OF YEARS HAS INSURABLE INTEREST IN THE LIFE OF HIS EMPLOYER TO THE EXTENT OF SALARY FOR THE TERM OF SERVICE
3. A CREDITOR HAS INSURABLE INTEREST IN THE LIFE OF HIS DEBTOR AND ALSO IN THE LIFE OF SURETY
4. A SURETY HAS INSURABLE INTEREST IN THE LIFE OF HIS CO SURETY AND PRINCIPAL DEBTOR
5. A PARTNER HAS INSURABLE INTEREST IN THE LIFE OF OTHER PARTNERS

• RIGHT OF INSURER TO AVOID LIFE POLICY
• IT IS A CONTRACT OF UBERRIMAE FIDEI AND FULL DISCLOSURE MUST BE MADE TO THE INSURER OF EVERY MATERIAL CIRCUMSTANCES WHICH IS KNOWN TO THE ASSURED AND WHICH WOULD INFLUENCE THE JUDGMENT OF PRUDENT INSURER IN FIXING THE PREMIUM OR DETERMINING THE RISK
• CASE : MITHOOLAL NAYANK V LIC OF INDIA

1. A TOOK A LIFE INSURANCE POLICY AND HID THIS FACT THAT HE HAD SUFFERED HEART ATTACK
2. HE MENTIONED THAT HE DID NOT SUFFER FROM ANY AILMENT
3. IT WAS MATERIAL MATTER AND HE SUPPRESSED THIS FACT
4. ON HIS DEATH, HIS FAMILY CLAIMED THE AMOUNT
5. BUT MATERIAL FACT WAS SUPPRESSED SO THE INSURER WERE ENTITLED TO AVOID THE CLAIM ON THE POLICY ON THE GROUNDS AVAILABLE UNDER TO THEM ON SECTION 45

• EXCEPTION UNDER SECTION 45
• AN EXCEPTION TO THE GENERAL RULE
• LAY DOWN THE ONUS IS ON THE INSURER AFTER THE EXPIRY OF TWO YEARS FROM THE DATE OF INSURANCE TO PROVE THAT ASSURED HAS BEEN GUILTY OF SUPPRESSION OR MISSTATEMENT OF MATERIALS FACTS
• AFTER TWO YEARS IT BECOMES UNCHALLENGEABLE UN TILL THE INSURER CAN PROVE THAT SUCH MISSTATEMENT OR CONCEALMENT OF MATERIALS FACTS WAS MADE FRAUDULENTLY
• SECTION 45 SAFEGUARDS THE INTERESTS OF THE ASSURED