You are on page 1of 26



Project report on Insurance Law

Submitted To:
Assistant Prof. Sayantani das
Submitted By:
Shivani Jaiswal
B.B.A.LL.B (Hons.) VII Semester

MATS University
MATS Law School, Raipur




Page No.

















This project report is authored by student of 4th year under the five year BBA.LL.B (H) Program
in MATS Law School, Raipur. The report is purely academic in nature and shall not be treated as
a legal or business advice. The views expressed in this report are personal to the student and do
not reflect the view of law school or any of its staff or personnel. All the copyrights relating to
this work are vested in the author; the same shall not be exploited without their express

Shivani Jaiswal
4th Year, MATS Law school, Raipur


Firstly, I am extremely grateful to Asst. Prof. Sayantani Das, for granting me the opportunity to
make the project report under the Indian civil procedure code.
I feel highly elated to work on this dynamic & in every field of Insurance Sector in our daily life
as well as in the court by using the Act related to this, highly important topic of law project
report on that is Life Insurance: Concept, Nature And Important Provison Under The Act
under the subject of Insurance law in our five year BBA.LL.B course. So, this topic instantly
drew our attention and attracted us to research on it.
So, I hope I have tried my level best to bring in new ideas and thoughts regarding the important
law section topic. Not to forget the deep sense of regard and gratitude to our faculty adviser,
Asst. prof. Sayantani Das who played the role of a protagonist. Last but not the least; I thank all
the members of the MATS Law School and all others who have helped us in making this project
a success.

Shivani Jaiswal

The objective of this project report is analyzed about the concept with the principle of Life
Insurance. In introduction of this project report deals with outlines of Insurance with various case
laws. After that explained about the history and basic objectives of the Life Insurance Act, 1956,
however it explain that in what manner and in what circumstances came into India. Further with
the help of case laws, the author wants to describe the three things which includes what are the
nature of life insurance, the role of principles under the insurance and in what way the contract is
formed within the purview of Indian Contract Act, 1872.
Further I explained about the legal provision under the Life Insurance Act, 1956 in which have
given the overview of this act with important provision. After that the author explained about the
various advantage with case laws which says that how it is benefited to the public, private as well
as public sector which proofs that insurance is a social device.

I have adopted the mode of primary research source where I have refereed some books of
Insurance law to take information about this project report. So I have taken materials, references
and guide from books
I have also adopted the Doctrinal Research Methodology where the sources of the project are
solely based upon the materials collected from the websites and books. Certain other resources
for our project are several Articles collected from various journals and magazines as well as
several other commentaries and digests written and published by several eminent scholars who
have excelled in various fields of the managerial fraternity nationally and internationally.
The objectives of research are

To understand the meaning of insurance with the concept, nature of life insurance and
their principles,
To understand the formation of contract within the purview of life insurance
To understand the legal position under the statutory provision of the insurance under Life
Insurance Act,1956 in India

Before research and making this project report I had little idea on Insurance Act. I was getting
studied about them in IRDA Act within India.

The whole idea of insurance has developed on the fact that human life is full of uncertainties and
the life of a person itself is very uncertain. It is well said that Life is full of risks for property,
there are fire risks, for shipment of goods, there are perils of sea, for human life, there is the risk
of death or disability and so on and so forth.1 The scheme of life insurance provides an
assurance that if such an event happens, the person or his dependents would get financial
assistance to bear the loss.
Insurance may be described as a social device to reduce or eliminate risk to life and
property. It is rightly defined as a social device for reducing risk by combining a sufficient
number of exposure units to make their individual losses collectively predictable, the predictable
loss is then shared proportionally by all these in the combination. 2 There are two branches of
insurance that is general insurance and life insurance. General insurance deals with the exposure
of risks of goods and property, whereas life insurance is a way to meet the contingencies of
physical death and economic death.
To understand life insurance we have to first understand the scheme of insurance. Insurance is a
co-operative device to spread the loss caused by a particular risk over a number of persons who
are exposed to it and who agree to insure themselves against the risk.3 Under the plan of
insurance, a large number of people associate themselves to share different types of risks
attached to human life and property. The aim of all types of insurance is to make provision
against such risks. In this way, life insurance is a social device to share the risk of loss of life.

1G. Gopalkrishna, The Social Security Character of Life Insurance, The ICFAI University Journal of
Insurance law, Vol. VI, No. 4, (2008), p.12.
2 (Rober Mehr, Emesson Cammack, 2000).
3 M. N. Mishra, Law of Insurance, Eighth Edition, (2010), p.1, Central Law Agency, Allahbad.

In simple words, it means an agreement in which one party agrees to pay a given sum of
money upon the happening of a particular event contingent upon duration of human life in
exchange of the payment of a consideration. The person who guarantees the payment is called
Insurer, the amount given is called Policy Amount, the person on whose life the payment is
guaranteed is called Insured or Assured. The particular event on which the payment is guaranteed
to be given may be Death or Life. The consideration is called the Premium. The document
evidencing the contract is called Policy.4
There is no statutory definition of life insurance, but it may be defined as a contract
whereby a person (insurer) agrees for a consideration (that is payment of a sum of money) or a
periodical payment, called the premium to pay to another (insured or his estates) a stated sum of
money on happening of an event dependent on human life.5
Life insurance is a contract to pay a certain sum of money on the death of a person in
consideration of the due payment of a certain annuity for his life calculated according to the
probable duration of life.6
Life insurance is a contract in which one party agrees to pay a given sum of money upon
the happening of a particular event contingent upon the duration of human life in consideration
of immediate payment of a smaller sum or other equivalent periodical payments by the other.7
In India, Life Insurance business is defined under Section 2 (11) of Insurance Act, 1938, which
reads as : Life Insurance business means the business of effecting contracts of insurance upon
human life, including any contract whereby the payment of money is assured on death (except
death by accident only) or the happening of any contingency dependent upon human life and any
4 M. N. Mishra, Law of Insurance, Eighth Edition, (2010), p.1, Central Law Agency, Allahbad.
5 Federation of Insurance Institute, Mumbai.
6 Dalby v. India and London Life Assurance Company (1854) 15 CB 365:139 AII ER465. See also
Goparatnam & ors v. LIC of India & 2 ors,2006 (2)Andh LD (Cons. Reporters) 10; Law Finder Doc Id #
7 Joseph v. Law Integrity Insurance Company (1912) 82 LJ187.

contract which is subject to payment of premium for a term dependent on human life and shall be
deemed to include the granting of :

disability and double or triple indemnity accident benefits, if so provided in the contract

of insurance;
annuities upon human life;
superannuation allowances and annuities payable out of any fund applicable solely to the
relief and maintenance of persons engaged or who have been engaged in any particular
profession, trade or employment or of the dependents of such persons;

In light of the above definitions the essential features of life insurance 8 can be summed up
as under:
(i) It is a contract relating to human life
(ii) There need not be an express provision that the payment is due on the death of the person.
(iii) The contract provides for payment of lump sum money.
(iv) The amount is paid at the expiration of certain period or on death of the person.

8 Avtar Singh, Law of Insurance, (2004), p.41, Eastern Book Company, Lucknow.

The history of life insurance in India started after the establishment of a British firm, in 1818
Oriental Life Insurance Company, the first life insurance company on Indian soil started
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life
insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of
protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies are taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a
capital contribution of Rs. 5 crore from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the Triton
Insurance Company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British.

Spread Life Insurance widely and in particular to the rural areas and to the socially and
economically backward classes with a view to reaching all insurable persons in the

country and providing them adequate financial cover against death at a reasonable cost.
Maximize mobilization of people's savings by making insurance-linked savings

adequately attractive.
Bear in mind, in the investment of funds, the primary obligation to its policyholders,
whose money it holds in trust, without losing sight of the interest of the community as a

whole; the funds to be deployed to the best advantage of the investors as well as the
community as a whole, keeping in view national priorities and obligations of attractive

Conduct business with utmost economy and with the full realization that the moneys

belong to the policyholders.

Act as trustees of the insured public in their individual and collective capacities.
Meet the various life insurance needs of the community that would arise in the changing

social and economic environment.

Involve all people working in the Corporation to the best of their capability in furthering

the interests of the insured public by providing efficient service with courtesy.
Promote amongst all agents and employees of the Corporation a sense of participation,
pride and job satisfaction through discharge of their duties with dedication towards
achievement of Corporate Objective.


A contract of insurance is a contract either to indemnify a person against a loss which may arise
on the happening of an event or to pay a sum of money on the happening of some or any event
for an agreed consideration. Under such a contract one party agrees to take the risk of another
persons life, property or liability in consideration of certain comparatively small periodic
The object of insurance should be lawful. The person proposing for insurance must have
interest in the continued life of the insured and would suffer pecuniary loss if the insured person
dies. This is known as Insurable Interest. In Life Insurance the presence of insurable interest is
essential at the time of effecting the Contract of Insurance .If there is no insurable interest, the
contract becomes wagering and hence illegal. Every individual has unlimited insurable interest
on his/her life. Husband has insurable interest on the life of his wife and vice versa.
The creditors have insurable interest on the lives of debtors to the extent of indebtedness.
Business partners have insurable interest in the lives of other partners to the extent of their
financial interest in the partnership. Employers have insurable interest in the lives of employees
who are key to the profitability of the business.


The nature of contract of life insurance may be summarized under the following heads:
(a) Unilateral Contract
It is that type of contract where only one party to the contract makes legally enforceable promise. 9 Here it
is the insurer who makes an enforceable promise. The insurer can repudiate the contract of payment of
full policy, but he cannot compel the insured to pay the subsequent premiums. On the other hand, if the
insured continues to pay the premium, the insurer has to accept them and continue the contract.

9 M. N. Mishra, Law of Insurance, Eighth Edition, (2010), p.1, Central Law Agency, Allahbad.

(b) Principle of Indemnity

Insurance contracts other than life insurance contract are contracts of indemnity in the sense that
the amount payable by the insurer in case of the contingency stated in the policy occurring is
limited to the loss that the insured will suffer. The insurance contract promises to keep the
insured indemnified against the financial loss that he would suffer on account of the happening
of the event.
(c) Contract of Utmost Good Faith

In Life Insurance contracts, a very high degree of good faith is required to exist between the
parties to the contract, viz., the insurer and the insured. This is called the principle of utmost
good faith (Uberrima fides) .It is the duty of the proposer to disclose the material information for
proper assessment of risk by the insurer
All the required information for the assessment of risk is known only to the proposer and the
insurer has no knowledge of the risk. The proposer may not be having technical knowledge about
the insurance products, the benefits, pricing aspects etc. and hence will have to rely upon the
insurer to ensure that the terms of the contract are fair and equitable.
An insurance contract is a contract of utmost good faith and therefore, the contracting parties are
placed under a special duty towards each other, not merely to refrain from active
misrepresentation but to make full disclosure of all material facts within their knowledge. 10 It has
been said that there is no class of documents to which the strictest good faith is more rightly
required in courts of law than policies of insurance.11
(d) Conditional Contract

Life insurance is subject to the conditions and privilege provided on the back of the policy. The
conditions put the obligation on a party to fulfill certain conditions before the proof of death or
of disability are the parts of the contract. The conditions whether precedent or subsequent of the
legal rights must be fulfilled in order to complete the contract.
10 Lakshmi Insurance Co. Ltd. v. Bibi Padmavathi AIR (1961) Punj 253, 2599.
11 Goldsall v. Boldero (1807) 9 East 72.

(e) Aleatory Contract

In such a kind of contract, no mutual exchange of equal monetary value is done. It is the
happening of the contingency on which the payment is made. If death occurs only after payment
of a few premiums, full policy amount is paid.
(f) Contract of Adhesion

The terms of the contract are most of the times fixed by one party (the insurer) and with minor
exceptions, must be accepted or rejected in total by the other party (the proposer). In such a
contract, the terms of the contract are not arrived at by mutual negotiations. Similarly, in a life
insurance contract, the contract is decided upon by the insurer only. The party on the other side
has to choose between the two options, i.e. either to accept or reject the policy.
(g) Contract of Certain Amount

Life insurance contract does not provide an indemnity. It is in the nature of a contingency
contract by providing for the payment of the agreed amount on the happening of the event.
(h) Standard Form of Contract

In the life insurance, all the essentials of a general contract as provided by the Indian Contract
Act, 1872, for a valid contract are present.


Like any other contract, a contract of life insurance must satisfy the essentials of a valid contract.
All the agreements are contracts if they are made by the free consent of the parties competent to
contract, for a lawful consideration and with a lawful object, and are not hereby expressly
declared to be void.12
(a) Offer and Acceptance
The intimation of the proposer's intention to buy insurance is the 'offer', while the insurer's
willingness to undertake the risk is the acceptance. The insurer may also propose to make the
contract. From whichever side the offer may be, the main fact is acceptance.
The offer in life insurance is usually made by the assured in the printed form of the proposal
supplied by the insurer. In life insurance the proposal is contained in four parts, namely, (i)
proposal form, (ii) medical report (iii) agent's report, and friend's report.
Generally, the acceptance of proposal is to be made by the insurer. The insurer receiving
the papers containing the proposal scrutinizes them and when they are found in order he signifies
his assent thereto by a letter of acceptance. Until this is sent there is no acceptance, though a
cheque for the premium is sent and the money is received and retained till after the death of the
(b) Consideration
The law of life insurance also requires a lawful consideration for its validity as it is essential to a
legal contract.13 Consideration is the price for which the promise of the insurer is purchased. The
payment of first premium is the consideration for the insurer and the insurers promise to
indemnify the assured from the stipulated risk in the policy is the consideration to the assured. In

12 The Indian Contract Act, 1882; Section 10.

13 The Indian Contract Act, 1882; Section 24.

case of Raj Narain Das Mahapatra,14 it was settled that cashing of the cheque was an acceptance
of the risk whether policy was issued or not.
(c) Competence of Parties
The parties must be competent to enter into a contract, the parties must be of the age of
majority,15 of sound mind and not disqualified from contracting by any law to which any of them
is subject.16
Regarding the insurance contracts only those insurers can grant insurance policies who have
been issued license under the Insurance Regulatory and Development Authority.17
(d) Legality of Object
A contract will be invalid if the object is illegal or against public policy. The object of life
insurance contract will be legal if it is made for one's own protection or for the protection of the
family against financial losses. In brief, the person desiring policy must have insurable interest in
the life proposed for insurance.18
The object of an agreement is lawful unless19:

it is forbidden by law, or
it is of such a nature, that if permitted would defeat the provisions of any law, or
it is fraudulent
it involves injury to person or property of another

14 (1881) 7 Calcutta 594.

15 Chandulal v. I.T. Commissioner AIR 1967 SC.
16 A person who is not competent to enter into a contract by reason of the provisions of Section 11 of the
Contract Act, 1882, can still be a beneficiary under a contract of insurance. Moreover, a minors property
may be insured by persons competent to act for him and he would be entitled to recover the insurance
17 The IRDA Act, 1999.
18 Liberty National Life Insurance Co. v. Weldon (1957) Albama 100 So 2d 696.
19 The Indian Contract Act, 1882; Section 23.


the court regards it immoral or opposed to public policy.

In Northern India Insurance Company v. Kanhaya lal,20 the policy became void because the
insured caused his own death before the policy has been in existence for one year.
(e) Free Consent of Parties

When parties to a contract agree on the terms and conditions of the contract in the same sense
and spirit, they are said to have free consent. The consent is said to be free when it is not caused
by coercion, or undue influence or fraud or misrepresentation or mistake.21
In a contract of insurance the insurer and the insured must be in genuine agreement as to
the subject matter of insurance, that is, life to be insured, sum assured and term of the insurance
and every other particular relating to the contract. When a person signs a proposal for insurance,
he gives his free consent to the contract. The proposer should understand the contents of proposal
in the same sense and make a written declaration on the proposal. He is responsible for the
proposal made by him.
In Bernarsi Das v. New India Assurance Co. Ltd.,22 a principle of law has been laid down.
It is well established rule of law that in case of a person who is illiterate or who is not in a
position to understand the contents of a document, the contract cannot be imposed upon him
simply because he had endorsed his signature thereon.
In Kulta Ammal v. Oriental Government Security Life Assurance Co. Ltd., 23 it was held
that in case of an illiterate person it is necessary to prove the fact that he had knowledge of what
was stated in the proposal.

20 AIR 1953 Lah 561.

21 The Indian Contract Act, 1882; Section 14.
22 AIR 1959 Pat 540, 546-547.
23 AIR 1954 Mad 636.

The Life Insurance Corporation of India (LICI) is the largest life insurance company in India it is
fully owned by the Government of India. Life Insurance Corporation of India (LIC) is an
autonomous body authority to run the life insurance business in India with its Head Office at
Mumbai. Headquartered in Mumbai, which is considered thefinancial capital of India, the
Life Insurance Corporation of India currently has 8 zonal Offices and 101 divisional offices
location in different parts of India, at least 2048 branches location in different cities and towns of
India along with satellite Offices attached to about some 50 Branches, and has an network of
around one million and 200 thousand agents for soliciting life insurance business from the
public. The Life Insurance Corporation of India is the largest insurance and investment group
owned by Indian State with assets, funds and policies
Life Insurance Corporation of India act was passed by the parliament on June 18, 1956
and came into effect from July1, 1956. Life Insurance Corporation of India commenced its
functioning as a corporate body from September 1, 1956. Its working is governed by the LIC
act. The LIC is a corporate having perpetual succession and a common seal with the power to
acquire hold and dispose of property and can by its name see and be sued.
CONSTITUTIONSection 3 of the LIC Act,1956: Establishment and incorporation of life insurance Corporation of
1. with effect from such date as the central government may by notification in the official
Gazette, appoint, there shall be establish a corporation called the life insurance
corporation of India.
2. The corporation shall be a body corporate having perpetual succession and a common
seal with power, subject to the provisions of this act to acquire, hold, and dispose of
property and may by its name sue and be used.
CAPITALThe original capital of the corporation shall be five crores of rupees provided by the central
government after due appropriation made by parliament by law for the purpose, and the terms
and conditions relating to the provisions of such capital shall be such as may be determined by
the central government.


The central government may on the recommendation of the corporation, reduce the capital of the
corporation to such extent and in such manner as the central government may determine.
TRANSFER OF SERVICESAll the employees except chief agent will be vested into new life business. The salary and terms
of employment will remain the same unless insurance business thinks fit to change the terms
of employment for the benefit of the policyholder. If any term is not acceptable to an employee,
he can be terminated by paying three months salary as compensation. Subject to such rules as the
central government may make in this behalf, every whole-time salaried employee of a chief
agent of an insurer whose controlled business has been transferred to and vested in the
AUTHORITIES(a)Managing Director
The corporation may appoint, one or more persons to be the Managing Director or Directors of
the corporation and every Managing Director shall be a whole-time officer of the corporation,
and shall exercise such powers and perform such duties as may be entrusted or delegated to him
by the executive committee or the corporation.
(b)Zonal Managers
The corporation may entrust the superintendence and direction of the affairs and business of a
zonal office to a person, whether a member or not, who shall be known as a zonal manager and
the zonal manager shall perform all such functions of the corporation as may be delegated to him
with respect to the area within the jurisdiction for each of the Zonal office.
FUNCTIONS OF CORPORATION -Section 6 of the LIC Act states that:
(1) Subject to the rules, if any, made by the Central Government in this behalf, it shall be the
general duty of the Corporation to carry on life insurance business, whether in or outside India,
and the Corporation shall so exercise its powers under this Act as to secure that life insurance
business is developed to the best advantage of the community.
(2) The Corporation shall have power-


a) to carry on capital redemption business, annuity certain business or reinsurance business

in so far as such reinsurance business appertains to life insurance business;
b) to acquire, hold and dispose of any property for the purpose of its business;
c) to transfer the whole or any part of the life insurance business carried on outside India to
any other person or persons, if in the interests of the Corporation it is expedient so to do.
d) to advance or lend money upon the security of any movable or immovable property or
e) to borrow or raise any money in such manner and upon such security as the Corporation

may think fit;

to carry on any other business which may seem to the Corporation to be capable of being
conveniently carried on in connection with its business and calculated directly or

indirectly to render profitable the business of the Corporation;

g) to carry on either by itself or through any subsidiary any other business in any case where
such other business was being carried on by a subsidiary of an insurer whose controlled
business has been transferred to and vested in the Corporation under this Act;
h) to do all such things as may be incidental or conducive to the proper exercise of any of
the powers of the Corporation.
(3) In the discharge of any of its functions the Corporation shall act so far as may be on business
(1) In entering into any arrangement, under section 6A of the Act, with any concern, the
Corporation may impose such conditions as it may think necessary or expedient for protecting
the interest of the Corporation and for securing that the accommodation granted by it is put to the
best use by the concern.
(2) Any director appointed as aforesaid shall
(a) hold office during the pleasure of the Corporation and may be removed or substituted by any
person by order in writing by the Corporation;
(b) Not incur any obligation or liability by reason only of his being a director or for anything
done or omitted to be done in good faith in the discharge of his duties as a director or anything in
relation thereto;

(c) not be liable to retirement by rotation and shall not be taken into account for computing the
number of directors liable to such retirement.
(1) Where an insurer whose controlled business has been transferred to and vested in the
Corporation under this Act has, at any time within five years before the 19th day of
January, 1956a. made any payment to any person without consideration;
b. Sold or disposed of any property of the insurer without consideration or for an
inadequate consideration.
c. Acquired any property or rights for an excessive consideration.
d. entered into or varied any agreement so as to require an excessive consideration to be
paid or given by the insurer;
e. Entered into any other transaction of such an onerous nature as to cause a loss to,
impose a liability on, the insurer exceeding any benefit accruing to the insurer.
(2) The Tribunal may make such order against any of the parties to the application as it thinks
just having regard to the extend to which those parties were respectively responsible for the
transaction or benefited from it and all the circumstances of the case.
(3) Where an application is made to the Tribunal under this section in respect of any transaction
and application is determined in favor of the Corporation, the Tribunal shall have exclusive
jurisdiction to determine any claims outstanding in respect of the transaction.
1) Where any property appertaining to the controlled business of any insurer has been transferred
to an vested in the Corporation under this Act, then, (a) Every person, in whose possession, custody or control any such property may be, shall
deliver the property to the Corporation forthwith;
(b) and person who, on the appointed day, has in his possession, custody or control any book,
documents or other papers relating to such controlled business shall be liable to account for the


said books, documents and papers to the Corporation, and shall deliver them to the Corporation
or to such person as the Corporation may direct.
(2) In particular, all the assets of an insurer appertaining to life insurance business held in deposit
by the Reserve Bank of India under the Insurance Act or by trustees in trust shall be delivered to
the Corporation.
(3) Without prejudice to the other provisions contained in this section, it shall be lawful for the
Corporation to take all necessary steps for securing possession of all properties which have been
transferred to and vested in it under this Act.


1. Covers Risk of Death:
Unlike any other ordinary saving plan, the insurance scheme covers the risk of death. In case
of death, insurance company pays full sum assured, which would be several times larger
than the total of the premium paid. Thus, it saves the family from the financial strain due to
unforeseen and premature death.24
2. Encouragement of Compulsory Savings:
After taking an insurance policy, if the premium is not paid the policy lapses. So, it becomes
compulsory for the insured to pay the premium. This builds the habit of longtime savings
thereby developing the attitude of savings. Thus it possesses a tremendous psychological
advantage as a method of saving because it is semi-compulsory in nature. Moreover, regular
savings over a period of time ensures that a decent corpus is built to meet the financial needs
at various stages.25
3. Facilitation of Liquidity:
Insurance facilitates and maintains liquidity. If the policyholder is not able to pay the
premium, he can surrender the policy for a cash sum.
4. Provision of Profitability:
Insurance is a source of investment. The money paid as premium is an investment with
assured returns. The element of investment i.e. regular saving, capital formation, and return
of the capital along with certain additional return are perfectly observed in life insurance.122
It provides economic security and better family life. The element of profitable investment
has made insurance more attractive.
5. Assistance in Odd Situations:
Life insurance is a necessity for a person having responsibilities of the family. Middle aged
people with children have potential expenses of their childrens education, settling them and
their marriage. It assists the family in case of sudden illness, death or accident of the bread
earning member of family and helps the dependents of insured by providing for education,
housing, medical treatment and marriage of children.
6. Easy Settlement and Protection against Creditors:
24 R. Haridas, Life Insurance in India, (2011), p.44, New Century Publications, New Delhi.
25 Accessed on 14/10/13 at 8:30 A.M.

The procedure of settlement of claims is very simple and easy. After the making of
nomination or assignment, a claim under the life insurance can be settled in a simple way.
The policy money becomes a kind of security which cannot be taken away even by the
7. Facilitation of Loan :
Policyholder have the option of taking loan against the policy. This helps you meet your
unplanned life stages needs without adversely affecting the benefits of the policy they have
bought. Insurance extends various kinds of short-term and long-term loans to insured for
business purpose or for some important domestic purpose.
8. Tax Relief:
Life insurance plans provide attractive tax benefits under most of the plans, both at the time
of entry and exit. Tax benefits are also available on the premiums paid and also on the claim
proceeds according to the tax laws in force. The money paid toward, insurance premium is
deducted from the gross income and this is really an investment.
9. Mental Peace:
Insecurity and uncertainty in life is the main cause of mental worries. Life insurance helps in
reducing this uncertainty and security as it is known that insurance company will come to his
rescue in case the risk feared occurs.27A person insured against such risks can get rid of all
his worries and lead a peaceful life.
10. Awareness towards Good Health:
Life insurance creates awareness towards maintenance of good health in the society.
Insurance companies have started health improvement movement throughout the world, by
distributing useful materials for health education.

26 Sadhak.H, Life Insurance in India, (2009), p.85, Response Books, New Delhi.
27 Accessed on 20/10/13 at
4:00 P.M.

Insurance can be described as a social device to reduce or eliminate risk to life and property.
When a human life is lost or a person is disabled permanently or temporarily there is loss of
income to the household. So everyone who has a family to support and is an income earner needs
life insurance. The idea underlying the concept of life insurance is that when your family
members or dependents depend on you financially: you need to secure their future. Having your
life insured is akin to promising your family that they wont ever face a financial problem,
whether you are there or not because your responsibilities do not end with you. It means buying
life insurance is like buying peace of mind for lifetime.
Thus, the significance of having a life insurance lies in the peace of mind that it brings
along. Apart from this it promotes savings, assist the family in odd situations, gives tax benefits
and facilitates easy loans thereby securing the future of insured. But in order to have a financially
secured future, you have to pay the insurer a life insurance premium, which is either a regular
annual payment or onetime payment as the case may be.
Life Insurance is the most popular form of Insurance as it transfers the financial risks
associated with your death to an insurance company. General Insurance like fire, marine,
property, vehicle etc. transfer the risk associated with your property to an insurance company so
that you dont have to pay out of pocket for any property damage covered under the terms of the
insurance policy. The central point of difference between the two is that life insurance is a nonindemnity policy and the event insured is certain.
At present, life insurance enjoys maximum scope because the life is the most important
property of the society or an individual. Each and every person requires the insurance. This
insurance provides protection to the family at the premature death or gives adequate amount at
the old age when earning capacities are reduced. The insurance is not only a protection but is a
sort of investment as a certain sum is returnable to the insured at the death or at the expiry of a