You are on page 1of 23

The Japanese eat very little fat and suffer fewer

heart attacks than the British or Americans.
On the other hand, the French eat a lot of fat and
also suffer fewer heart attacks than the British or
The Chinese drink very little red wine and suffer
fewer heart attacks than the British or Americans.
The Italians drink excessive amounts of red wine
and also suffer fewer heart attacks than the British
or Americans.
Conclusion: Eat & drink what you like.
“ It's English that kills you ”.

Part Two: Life Insurance

Nature of Life Insurance
Classification of Policies
Selection of Risk
Measurement of Risk & Mortality
Calculation of Premium
Treatment of Substandard Risks
Investment of Funds
Surrender Value
Valuation and Surplus
Policy Condition

whereby the insurer. . undertakes to pay a certain sum of money either on the death of the insured or on the expiry of a fixed period. in consideration of a premium.Nature of Life Insurance Contract • Life insurance may be defined as the contract.

Features of Life Insurance Contract • • • • • • • • Nature of General Contract Insurable Interest Utmost Good Faith Warranties Proximate Cause Assignment and Nomination Return of Premium Other Features .

– Agreement (Offer and Acceptance) – Competency of the Parties – Free Consent of the Parties – Legal Consideration – Legal Objective . Nature of General Contract • A valid contract must have the following essentials.1.

this is called acceptance. . Nature of General Contract • Offer and Acceptance. – Deals begin when one person makes a proposal to exchange something of value with another person. – If the second person agrees to the exchange. The proposal to make an exchange is called the offer.1.

Nature of General Contract • Competency of the Parties. – Free from coercion. undue influence. misrepresentation. there is no perfect agreement. or mistake . – Majority – Persons of Sound Mind – Other Disqualification • Free Consent of the Parties. fraud. – If they do not meet in this respect. – Both parties must be of the same mind at the time of consent.

. – The presence of a lawful consideration is essential for a legal contract. Nature of General Contract • Legal Consideration. • Legal Objective. – The objective will be legal only when there is insurable interest and when the object is legal. – The insurer must have some consideration (premium) in return of his promise to pay a fixed sum (sum insured) at maturity or death.1.

• Categories. – Own life – Other’s life. Insurable Interest • Pecuniary interest – arises out of the pecuniary relationship that exists between the policy-holder and the life assured. • Where proof is not required • Proof is required – Business relationship – Family relationship .2.

Insurable Interest Classification Insurable Interest Own Life Other’s Life Proof not Required Proof Required Business Relation Family Relation .

– Unlimited insurable interest – Loss cannot be measured in terms of money – So no limit can be placed .2. Insurable Interest • Insurable Interest in Own’s Life – – The person will continue to gain financially while surviving. – Will suffer loss if he is dead because he will be unable to earn or to protect the property.

– Proof not Required • Wife has insurable interest in the life of her husband • Husband has insurable interest in the life of wife – Proof required • Business relationship – A creditor has in the life or his debtor – A trustee has insurable interest in respect of the interest of which he is trustee – A surety has insurable interest in the life of his principal – A partner has insurable interest in life of each partner – An employer has in the life of a key-person – An insurer has in the life assured.2. Insurable Interest • Insurable Interest in Other’s Life. .

2. – Mere relationship or ties of blood and of affection does not constitute insurable interest. . – The insurable interest may arise due to family relationship if pecuniary interest exists between the policy-holders and life assured. Insurable Interest • Family Relationship. – The proposer must have a reasonable expectation of financial benefit from the continuance of the life of the person to be insured or financial loss from the his death.

– Must exist at the time of proposal – But not essential at the time of claim • Services.General Rule of Insurable Interest in Life Insurance • Time of Insurable Interest. . – Only to spouse. not to relatives – Must have a financial relationship between the proposer and the assured.

The Legal Responsibility May be Basis. Legal Consequence. . – The value must be determined • • • • Should be Valid.General Rule of Insurable Interest in Life Insurance • Must be Valuable. Must be Definite.

– No concealment. Utmost Good Faith • Material facts. fraud • Extent of the Duty. half disclosure.3. – Age. – Non-disclosure leads to a voidable contract • Indisputability. • Full and True Disclosure. – Contest provision . misrepresentation. income. family history. and plan of insurance • Duty of Both Parties. occupation. health. habits. residence. – A full disclosure and correctly fulfilled • Legal Consequence.

Utmost Good Faith • Facts not Required to be Disclosed.3. – Circumstances which are diminishing the risk – Facts which are known to the insurer – Facts which the insurer should infer from the information given – Facts which are waived by the insurer – Facts which are superfluous to disclose by reason of a condition or warranty – Facts of public knowledge .

3. – Information given by a proposer for insurance to the insurer during the negotiations is a representation. Warranties • Representation. – False or untrue representation may lead to a voidable contract • Warranties. – Informative warranties – the proposer is expected to disclose all the material facts to the best of knowledge and belief. . – Promissory warranties – relating to the future may be statements about his expectations or intentions • Breach of Warranties.

5. the insurer will pay • In life insurance the doctrine of Causa Proxima is not applicable. Proximate Cause • The efficient or effective cause which causes the loss (peril) • If the peril is insured. – War-risk – Suicide – Accident benefit .

– Freely endorsed in the policy or by a separate deed – Notice must be given to the insurer – Once the assignment is completed.6. it cannot be revoked • Nomination. Assignment and Nomination • Assignment. – Nomination can be assigned at any time by the holder of the insurance – Can be cancelled before maturity but notice must be given to the insurer .

Return of Premium • Generally cannot be refunded unless.7. – The insurer is incapable to run the risk – A void contract on account of misrepresentation or breach of warranties – The insured can claim the return of premiums paid .

. Other Features • • • • • Aleatory Contract. Unilateral Contract.8. Conditional Contract. Not a Contract of Indemnity. Contract of Adhesion.