CLASSES OF INSURANCE
LIFE INSURANCE
This is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual’s or individual’s death. It is the risk pooling plan and economic device through which the risk of premature death is transferred from the individual to a group In return the policy owner or policy payer agrees to pay a stipulated amount called a premium at regular intervals or in lump sums (so-called “paid up” insurance).
A life insurance contract is intended to meet the needs of survivors or beneficiaries, when the investor dies. From the life insurance contract, the beneficiaries receive a sum of money that far exceeds the value of the premiums the investor had paid. The beneficiaries, of course, receive this benefit if the person insured dies during the contract period.
The contract of life insurance is different from other types of insurance in the following respects.
The event insurer against is an eventual certainty i.e. nobody lives forever.
It is not the possibility of death that is insured against; rather, it’s the untimely death. The risk is not whether the insured person is going to die but when.
The risk increases as the individual ages or grows older because chances of death are greater in later years than in initial years.
There is no possibility of partial loss in life as in the case of property and liability insurance. Therefore, if a loss occurs under life assurance, the insurer will have to pay the face value of the policy.
Life assurance is not a contract of indemnity, that is, the position after the loss as before the loss. This is because it is not possible to place a value on human life.
Life assurance does not violet the principle of contribution i.e. counts of law have held that every individual has unlimited interests in their own