Legal Principles of Life Insurance

Insurance Contract

• Involves a contractual agreement in which the insurer agrees to provide financial protection against certain specified risks for a price or consideration known as the premium
• The contractual agreement takes the form of an insurance policy
• Insurance is a value contract and economic value of asset

Elements of Valid Contract

1. Offer and acceptance: One party make an offer which the other party accepts unconditionally
2. Consideration : Means premium from insured & the promise to indemnify is the consideration from insurer
3. Agreement between parties(Consensus ad item): Both the parties should agree on the same thing in the same sense
4. Free consent : There should be free consent while entering into a contract
5. Capacity of the Parties : Both the parties to the contract must be legally competent to enter into the contract(Major, Soundminded, not disqualified under law)
6. Legality: The object of the contract must be legal