Life Assurance Life assurance may be defined.

1. A contract in which insurer agrees to pay a specified sum on the happening of a particular event. .

2. A contract whereby the amount insured become payable after the consideration of the premium either at death or at a particular age.

3. An economic and social device by which protection may be provided for the insured at a stated age.

The primary purpose of life assurance is to afforded financial protection to dependents when the earning member dies.

Life Assurance provides not only protection but also investment. The premium that the insured pays go on accumulating in a fund every year. The sum so accumulated by the insurance company earns interest. Under this type of assurance, a person may also invest his capital in a annuity which will pay him an income every year till death. Hence, it may be regarded as an investment.

Difference between Insurance and Assurance

The words Insurance and Assurance are not similar but these are often used interchangeable. Some writers on this subject have tried to draw distinction between these two terms. It is maintained by some writers that the term insurance should be applied to those contracts where the insured amount is payable on the occurring of specific event which may or may not arise during the particular period. As sea perils (Marine Insurance) or property damage by fire (Fire Insurance) or risk of theft and robbery. (Theft Insurance and robbery insurance respectively). If no such destruction or damage takes place nothing becomes payable to the insured.

While the term "Assurance" should be applied to those contracts where the insured amount is guaranteed on the happening of death which is bound to take place sooner or later. So the Assurance is used where the risk attached to the contract is certain as death in life Assurance and on the other side the word Insurance is used where the risk attached to the contract is uncertain as in case of Marine & Fire insurance.

According to some other writers the word Assurance may refer to the "Principle" where as the word Insurance may refer to the Practice.

PRINCIPLES OF LIFE ASSURANCE CONTRACT

The following are the chief essentials of principles of the life assurance contract.

1. Insurable interest

Life insurance must be supported by an insurable interest for the validity of its contract. It must be present in life assurance when the policy is taken. This interest must be such that loss to the owner of the policy will result from the death of the person insured.

2. Absolute good faith

It is a personal contract between the insured. So it is generally required that each party shall exercise a high degree of good faith disclosed which may have in any way connection with the contract. Insured must provide the correct information in regard to his age, physical position and material status etc. In the event of any concealment of such a fact the policy will be voidable.

3. Ordinary contract

The contract of life Assurance is not a contract of indemnity. But is an ordinary contract which may be simple or pure. In this type of insurance the sum insured must be payable to full extent on the completion of stated period.

4. Assignment of policy

Insured may assign his policy to other person for valuable consideration. He should make the assignment in writing and notice must be served to the insurer. The assignment of a life policy means the passing of the rights and obligations of the insured person to an other party.

5. Proof of death

The person who had insurable interest must provide adequate evidence of the death of insured person to insurance company. A registrar's Certificate is the usual proof furnished.

6. General consideration

Life Assurance contract is a written agreement. It must be incorporated in the form required by law. The written contract must speak for itself. There parties to the agreement must be competent to contract. The agreement must be supported by a valuable consideration and the object must be legal.

7. Proof of age

On the maturity of the policy, the insurance company requires a reasonable and authentic proof of age before the payment of the insured sum. Age can be proved by a certified copy of an entry in the Municipal Register of birth. It is advisable to give proof of age as soon as the policy is taken.

8. Contract period

A contract of life assurance is not a contract for a year but for a long period and cannot be cancelled by the insurance company, event though it call be terminated by the insured person.