Here You Will Study All These In Details :-
- Origin and development of life insurance
- Meaning and definitions of life insurance
- Features of Life Insurance
- The need and importance of life insurance
- Elements of a life insurance contract
- Procedure of life insurance
It is clear from the long history of human life that man always desires and wishes for a secure future. Insurance is needed only to get protection from risks and uncertainties. If we see from ancient times till today, the risk to human life is always worried. Due to the presence of destructive forces everywhere, there are possibilities of loss of human life and property. Life insurance is an excellent system to provide protection against the consequences of various risks related to human life. There are many types of family and social responsibilities of human beings, which require sufficient funds to fulfill them. He has to make proper arrangements not only for today but also for meeting the needs of the future, for which he tries to save money in many ways. Life insurance is also a means of capital investment, And many people also use it as a means of investment of their small savings. Man’s life is mortal, I do not know when he will get death by accident, then what will happen to his dependents? Life insurance has both protection and investment element, whereas in other insurance only the element of protection remains. The main function of life insurance is to provide protection against financial difficulties arising out of old age and disability. Life insurance provides protection to a person in many ways in his life. But, along with security, it also creates wealth by accumulating or saving money. Today life insurance occupies the highest position in the insurance business. Looking at its expansion, prevalence and importance, it can be said that in the coming times, its utility and need will be more beneficial for mankind.
The origin of life insurance in India is visible from the Vedic period. In our religious text Vedas, the word Yoga-Kshem mentioned under Rigveda has been used, which means protection of life. Since ancient times, man has been looking for ways to protect his life. But, the systematic form of life insurance is visible only after the British came to India.
The business of life insurance in our country was started by the British in the year 1818 through the establishment of Oriental Life Insurance Company, which was headquartered in Calcutta. Life insurance business in India and its structure could be started systematically only from the year 1670, when Bombay Mutual Insurance Society Limited was established. After this, Oriental’ in 1874, ‘Bharat’ in 1896 and Empire Insurance companies were established in 1897.
Before 1938, there was no separate Act related to the insurance business and insurance companies were governed and controlled according to the Companies Act like other types of companies. In the year 1938, for the first time, the first Insurance Act was passed, under which arrangements were made to conduct the activities of life insurance companies.
The insurance business got a new direction during the freedom movement in the country. Many insurance companies were established between the period 1900-1947, due to which appreciable growth was recorded in the life insurance business. But after independence and due to the economic instability arising out of partition and lack of clear policy, the progress of insurance business was adversely affected. Life Insurance Corporation of India was established by the Central Government in 1956 by nationalizing private life insurance companies as a revolutionary step in the field of insurance business. The Life Insurance Act of India, 1956 was passed with the objective of systematically conducting and controlling the business of life insurance. Malhotra Committee (1994) made important recommendations for reforms in the insurance sector. Based on this, the Central Government had passed the Insurance (Amendment) Act, 1999. The Insurance Control and Development Authority (I.R.D.A.) was established in the year 2000-2001 to make the insurance business comprehensive and dynamic. Now the doors of the insurance sector have been opened to the banks and non-banking companies of the country with the help of foreign partners.
In simple words, life insurance is such a contract between the insurer and the insured. in which in return for a certain consideration (premium) after a certain period of time or on the occurrence of a certain event (death) within that time period, the insurer promises a certain sum of money or compensation to the insured or his heirs,
According to J. H. Magee , In the broadest sense, a life insurance contract is an arrangement in which the insurer undertakes to pay a certain sum of money to a certain beneficiary on the death of the insured or at the end of a specified period.
According to the Life Insurance Corporation of India, “Life insurance is a contract, which provides for the payment of a certain sum of money to the insured on the occurrence of a particular event or, in the absence of it, to his heirs.
According to the Federation of Insurance Institutes, Mumbai, “A life insurance contract is a contract by which one person (the insurer) pays a specified sum of money to another person (the insured) or his heirs in exchange for a fixed sum of money or a periodic payment called a premium. FOE undertakes to pay 12% on the occurrence of an event dependent on the life. Thus, based on the above definitions, it is clear that life insurance is a contract in which the insurance company pays a premium for the death of the insured or for a specified period. on its termination, undertakes to pay a certain sum of money to him or his authorized heirs.
Following are the salient features of life insurance contract –
- There are two main parties in life insurance – the insurer and the insured.
- Life insurance is a contract under which the insurer undertakes to pay a specified sum of money in return for receiving the premium.
- The basis of life insurance is the principle of co-operation, in which the risk of some people is spread to the community surrounded by similar risks.
- In life insurance, payments are made on the occurrence of a certain event or at the end of a certain period.
- It establishes certainty in place of uncertainty in life.
- It is a business in which human life is insured.
- In this, the life insurance contract is considered to be breached if the premium is stopped,
- This agreement is made in the prescribed format.
- This contract is signed by the insurer only.
The need and importance of life insurance Since ancient times, human life has been very difficult. In the present era where new facilities are being available to man, human life is becoming more unsafe and risky, that is, there is always uncertainty in human life.
A person’s life is valuable not only for himself, but also for his dependents. If he lives long enough and maintains his ability to earn a living, he himself may have recourse to the protection of his dependents, but his untimely death or loss of ability to work may put his dependents in danger. Financial crisis creates a frightening situation in front of the individual and the family at such a time. A clever and experienced person puts the burden of all his risk on the insurance company by depositing the prescribed premium.
Life insurance is needed to get protection from the risk arising due to the untimely death and disability of the person. Life insurance is like a stick of old age, with the help of which old age passes without any trouble. Prof. Dinsdale has written that “in the modern world no one can live without insurance.”
Life insurance is also a means of capital investment and many individuals deposit their savings in the form of premium in the life insurance company, which turns out to be a huge amount. The insurance company keeps investing this deposit in the industries and production works of the country.
The protection of employees working in industrial organizations from life-related risks becomes possible through group life insurance.
The benefits or importance of life insurance are being presented by categorizing as follows-
- As a means of protection, – Life insurance can have benefits as a means of protection,
- Family protection – Life insurance person’s untimely Helps family in case of death. Life insurance provides certainty to the person concerned about the future of the family and assures him that even in his absence, the family members will not remain helpless or oppressed as they will get protection from financial troubles.
- Arrangement for children – Today the burden of family responsibility has increased more. Money is needed for higher education of children and marriage of children and fulfilling these two responsibilities has not been easy or easy due to lack of money. Money can be arranged by taking education and marriage policy of life insurance, under which the insurance company provides in installments for education and a lump sum amount for marriage at certain times.
- For old age – If there is no other way to earn a living in old age, then it becomes difficult to live. Life insurance makes it easy. In life insurance, you can be protected from old age by taking pension policy, mediclaim policy and other policies. When the premium paid for life insurance is received in the form of a huge amount tomorrow, the various sufferings of old age are reduced to half.
- Occupational safety – Not only is the importance of various systems of property insurance or liability insurance in commercial and industrial work, but life insurance has also been found beneficial. The arrangement of business protection through life insurance can be clearly understood from the following examples
- A lender can secure the loan amount by insuring the life of its borrower.
- Industrial organization can avoid financial loss by getting life insurance of its important experienced and qualified employees.
- Life insurance is done for the partners or investors in the business. On his death, a certain amount is received from the insurance company to return his capital.
- A businessman can also take loan for business in times of crisis by mortgaging a life insurance policy with financial institutions.
- Protection of Mortgage Property – If the mortgagee has got life insurance done and he dies, his family can redeem the property by repaying the loan from the amount received in case of death. Thus life insurance protects the mortgaged property.
- Life insurance in the form of investment – Except life insurance, only the safety element is found in all other insurance, but the specialty of life insurance is that along with the safety element, investment element is also found in it. All other insurance is based on the principle of indemnity, in which no payment is received from the insurance company if there is no loss, but, in life insurance, the premium which the insured deposits to the insurance company, as a result, the investment keeps happening automatically. In life insurance, after the occurrence of a certain period or event, the insured or his heirs receive a fixed sum of money. Life insurance as an investment is a high degree of risk free security. Loans can be taken from financial institutions against this security.
- Life insurance as an investigative institution – Life insurance institutions hold a prominent place in the investment institutions of the country. Life insurance institutions collect the savings of lakhs of insureds in the form of premiums and invest them in the development programs and other industrial production sectors of the country. In this way, life insurance helps in capital formation and provides capital for industrial and economic development.Nowadays insurance companies also invest their huge premiums and accumulated funds in stock exchange centers.
- Other benefits of life insurance – In addition to the above benefits of life insurance, other benefits are also obtained from it, which are as follows
- Life insurance encourages individual thrift and savings.,
- Income tax exemption is available on the premium paid in life insurance.
- Life insurance enhances the efficiency of the individuals by providing them certainty from uncertainty and freeing them from worry.
- Life insurance is a social service of a high order. It saves families from disintegration.
- Life insurance enhances the economic credit and social standing of individuals.
A life insurance contract can be valid in the eyes of law only when certain essential elements are included in this contract. The essential elements of a life insurance contract can be studied by classifying it into two parts,
- Common elements – Every valid contract must have the common features given under the Indian Contract Act, 1872. Therefore, in the same way, a valid life insurance contract must also have the following general elements.
- Two parties – In a life insurance contract, it is necessary to have two parties, the insurer and the insured.
- Offer – For the formation of a valid contract, the subject matter of the contract must not only be in writing but also in a prescribed format.
- Acceptance – In a life insurance contract, the acceptance of the offer must be unconditional. The insured gives his acceptance for this through the prescribed acceptance letter. In this acceptance letter it is clarified that from when the insurance will start. It is worth mentioning that it is not sufficient for acceptance by the proposer filling the offer form and giving receipt by the insurer. Generally, in insurance contracts, it is assumed that the insured sends many information and things in the proposal form. The insurer estimates the risk probabilities of the insurance on the basis of all these information and the report of his subject expert. On the basis of this risk assessment, the insurer sends its acceptance to the proposer with its conditions and asks to deposit the premium at a given time. In this way the premium is accepted in the life insurance contract, then it is considered accepted.
- Ability of the parties to contract – In life insurance, both the insured and the insured should have the ability to enter into a contract. According to Section 11 of the Indian Contract Act, 1872 “Every person who is an adult, is of sound mind and has not been disqualified under any law in force to which he is subject.” It is clear from this section that minors and people of unsound mind cannot enter into a contract. However, the parent or statutory guardian of the minor may insure his life for the benefit of the minor. Similarly, a person of unsound mind cannot enter into a life insurance contract. People of unsound mind can enter into an insurance contract when they are of sound mind.
- Considerations – Like every valid contract, a life insurance contract must also have a valid consideration. In the absence of consideration, the contract of insurance becomes void. According to the Insurance Act of India, 1938, advance payment of insurance premium is the first condition of a letter of insurance. In a contract of life insurance, the premium paid by the insured is the consideration for the insurer and the compensation or fixed sum paid by the insurer on the occurrence of a certain event is the consideration for the insured.
- Free consent – For the validity of a life insurance contract, it is necessary that there should be free consent between both the parties. According to Section 13 of the Indian Contract Act, 1872, the consent of two or more persons is deemed to be when they agree on a point in the same sense. According to section 14, free consent is when it is not given by reason of fraud, harassment, undue influence, misrepresentation or error. If the parties to the contract of insurance have given consent by fraud, harassment, undue influence and misrepresentation, the contract shall be voidable at the will of the party whose consent is so taken. But in the event of the fault of the parties, the contract will be void.
- Statutory Purpose – For the validity of life insurance, its objectives must be valid. According to Section 23 of the Indian Contract Act, the object of any contract is void when :-
- that contract is barred by any law or,
- the nature or object of the contract is to defeat the provisions of any law or,
- the object of the contract is fraudulent or, iv the object of that contract is to cause harm to the body or property of others Or,
- contract which the court considers immoral or,
- The court considers that contract against public policy.
- In the absence of any one of the above elements, the insurance contract is considered void. Contracts for illegal business, smuggling, punishable offenses and damage to someone’s property are completely void and illegal. While making a contract of insurance, the purpose of insurance is asked in the offer form, which should not be concealed and that purpose should be lawful.
- Compliance of other formalities – Compliance of formalities is also necessary for a valid contract of life insurance. In its absence the contract cannot be enforced. The insurance letter must be printed or in writing and as per the Indian Stamp Act, every insurance policy must bear the required stamp. The insurance policy is signed by the insurer only.
- Special Elements – In a life insurance contract, it is necessary to have some of the following special elements,
- Having absolute trust – The life insurance contract is based on the principle of absolute trust. The ultimate good faith in life insurance means that each party to a proposed contract shall inform the other party of all factors that would affect its decision to enter into the contract, whether or not such information is requested. Absolute trust means not to deceive, deceive, conceal and misrepresent.,, The insurer and the insured, both the parties to the life insurance contract, should not hide any material facts from each other. For life insurance, the insured has to answer the questions given in the proposal form to the insurance company. Through these questions various types of information are sought about the insured such as his age, health condition, his habits, his occupation/profession and information about his family members etc. This offer letter should be filled in carefully, clearly, completely, truthfully and honestly by the insured. At the end of the offer letter, the insured has to declare that the information and facts furnished by him are true and correct to the best of his knowledge. If the statement of the proposer/insured turns out to be false, then the proposed contract is deemed to have breached the rule of utmost confidence due to concealment, non-disclosure and misrepresentation and such contract will become void. Similarly, the principle of utmost confidence is equally applicable to the insurer and his agent. It is the duty of the insurance agent to give complete and accurate information regarding the insurance to the proposer. Never encourage the insured to get insurance by hiding the truth and reality. If this is done, the insured party may render the contract of insurance void.,, But the liability of the insured is considered to be slightly higher. This is usually mainly because the insured knows or is in a position to know much more information about the subject matter of insurance than the insurer. In addition, in the contract of insurance, the insurer is the party taking the risk. Therefore, there is comparatively less need to show him the supreme good faith.
- Insurable interest – Insurable interest means such financial interest in the subject matter of insurance that in the absence of it, the insured would suffer financial loss or benefit from its protection. An insurable interest is said to be in a life insurance contract when there is such a relationship with the proposed life that there is a financial loss from his death or a financial gain from his survival. In life insurance, the subject matter of insurance is life. The person insured can insure his own life or that of others. In a life insurance contract, the insurable interest must be there at the time of insuring. In fact, the principle of indemnity is not fully applicable to life insurance because the value of human life cannot be measured in rupees. But in order to differentiate between insurance and gambling, it has been considered necessary that there should be an insurable interest in life insurance. Thus the insurable interest must be pecuniary. The interest is assessed on the basis of the financial loss caused to the beneficiary in the life of the insured due to the death of the insured. Therefore, keeping this in mind, the same amount can be insured. Life insurable interest is found in the following circumstances
- A person has unlimited insurable interest in his life.
- A partner has an insurable interest (equivalent to the capital invested in the partnership firm) in the life of his partner or partners.
- A lender has an insurable interest in the life of the debtor to the extent of the amount of the loan plus interest as the lender suffers a financial loss in the event of the death of the debtor.
- Husband has interest in wife’s life and wife has interest in husband’s life. This interest is unlimited.
- If a sister is dependent on her brother, the sister has an insurable interest in the brother’s life.
- A father has an insurable interest in his son’s life (if he is dependent on his son) and a son has an insurable interest in his father’s life (if he is dependent on his father).
- An employer has an insurable interest in the life of his employee to the extent of pecuniary loss caused by his death.
- The surety is considered to have an insurable interest in the life of its original debtor to the extent of the amount of security.
- If a surety has an insurable interest in the life of his co-surety, he can also insure the co-surety. In this, the amount of insurance can be up to the extent of his liability.
- A company has an insurable interest in the life of its officers or managers. Because their death can affect the financial benefits of the company.
After the life insurance business was nationalized in 1956, only the Life Insurance Corporation of India could insure life. But in the present time many private tax new have come in this area. Corporations and private companies have appointed insurance officers i.e. agents to encourage and motivate people to take life insurance in every village, town, city and branch. These agents look for and try to get in touch with people who wish to get insured. Insurance agents motivate people to take a policy according to their needs and facilities by making a comparative description of the merits or benefits of different insurance policies. When a person agrees to get life insurance, then he has to follow the following procedure (from proposal to policy) to get life insurance.
- Filling the proposal form – The person who has a life insurance first has to fill the printed proposal form of life insurance. This offer letter can be obtained free of cost from a local agent or insurance company. Many questions are given in the definite format of this offer letter, with the answers of which the insurance company gets all the important information. The Life Insurance Corporation of India has prescribed different formats for different proposal letters for life insurance. Such as offer letter to insure one’s own life, offer letter to insure other person’s life and offer letter for specific types of policies etc. But all types of offer letter have some things in common. The following details are mainly given in the offer letter
- Details related to the proposer – In this part of the offer letter, the proposer has to give information about many personal facts about himself. The corporation seeks the following information from the proposer –
- Name of the proposer, Father’s name, Permanent address Nationality, Address for correspondence.
- Present occupation and nature of work (eg full description of job, trade or profession). In this, the proposer should give clear details of work, post, department, name of employer, period of service etc.,
- Date of birth, place of birth, age certificate.
- Type of Life Insurance Policy, Sum Assured, Term of Insurance, Mode of Premium Payment (Monthly, Quarterly, Six Monthly or Yearly).
- The purpose of insurance such as financial security for the family, provision of income for old age, education of children and arrangements for marriage etc. vi. Name, age, address and relation of the nominee.
- Details of life insurance policies taken in the past (number of insurance policies, date of issue, plan name and premium amount etc.).
- If the proposer is engaged in military service, naval or air service or any other risky business, the details thereof,
- Name and address of any friend or acquaintance or eminent person of the society (for necessary inquiries about the proposer)
- family and health related details of the proposer –
- Family details include present state of health of parents, siblings, children, wife or husband, age, details of diseases, cause of death if a member has died, age at the time of death etc.
- In health-related details, the proposer general state of health, habit, such as the description of substance abuse, information about suffering from a particular type of disease, etc.
- In case of female proposer, such as giving information related to pregnancy etc. Apart from this, information about their income, education, marital status, husband’s occupation etc. is sought.
- Declaration by the proposer – The format of the proposer’s declaration is printed in the last part of the offer letter. The proposer, after understanding all the questions mentioned in the offer letter of this declaration, gives honest, correct and complete answers. The proposer also hereby declares that the information given by him in the offer letter and the said declaration will be the main basis of the contract entered into with the Life Insurance Corporation and if any statement is found to be false, the contract will automatically terminate and the insured will pay The entire amount paid will be forfeited. The above declaration is considered a warranty from the point of view of law and it is necessary to comply with it.
- Signature – The offer letter should be signed by the proposer himself or by his authorized representative. In case the proposer is not an educated person, then his left hand thumb impression, which should be attested by the witness. The date must be put on the offer letter.
- Details related to the proposer – In this part of the offer letter, the proposer has to give information about many personal facts about himself. The corporation seeks the following information from the proposer –
- Certificate of date of birth attached – The certificate of date of birth should be attached to confirm that the date of birth written in the offer letter is correct. The proposer is an adult or a minor and the premium is also calculated on the basis of this certificate. Therefore, the proposal is considered incomplete without attesting the age. Certificate of any school or board in the form of a certificate of date of birth, in which the date of birth is mentioned, apart from this, a certified copy of the record in the birth and death register of the Municipality / Gram Panchayat / Municipal Council, the certificate of naming ceremony, Birth chart, age mentioned in service book, passport etc. can also be attached as date of birth certificate.
- Handing over the form to the agent – The offer letter is filled and handed over to the agent, who examines it thoroughly and finds out if there is any deficiency in the form. If the information sought is left blank, then the agent tries to get them completed by asking the proposer
- Health check-up – If health check-up is mandatory for the proposed insurance to the proposer, then the authorized sectors of Life Insurance Corporation of India give a health check-up and report in the prescribed form. It is clear that health check-up is not mandatory for all types of life insurance, but in general, health check-up is necessary in case of large sum insured and above 50 years of age. Many times such things are detected by health checkup, which are not revealed from the information filled in the offer form.
- Agent’s Report – The insurance agent, on the basis of his knowledge, experience, gives his opinion and confidential report to the insurer (corporation) in this regard whether the person should accept the offer of insurance or not. In this report, he gives information regarding the health condition, financial condition, character, purpose of getting insurance, habits etc. of the proposer. This report also has to state how long he has known the proposer, whether the proposer is his relative or not, whether he knows any fact about the proposer which is likely to increase the risk, etc. The insurer estimates the risk on the basis of the confidential report submitted by the agent.
- Reporting by the Branch Officer / Development Officer – Now the proposal letter by the agent and all the reports attached with it are submitted to the branch office, then the Branch Officer / Development Officer inspects them. Generally, the agent’s report is considered sufficient, but if the amount of insurance is large, then the development officer or branch officer can also verify the information and submit the report to the branch office in relation to the proposer (insured). In this context, the Development Officers collect in-depth information through interviews from the neighbors of the proposer, participating employees, bankers, business associates and other concerned persons.
- Consideration of the proposal letter by the corporation – After the completion of all the above actions, the proposal letter and the forms along with it are inspected by the branch office. In which mainly the name of the insured, address, date of birth, occupation / profession, sum insured, family background and history, signature and various other reports are thoroughly checked. If false information is found in the offer letter, the corporation can cancel the contract even after it is signed. The branch manager has to determine the level of risk proposed and whether it should be insured or not.
- Deposit of premium amount – The branch office asks the proposer to deposit the amount of first premium within the stipulated time. It must be kept in mind that if the premium is to be paid on the basis of monthly installments, then the amount of three monthly installments has to be deposited. The minimum amount of monthly installment is Rs.10.
- Acceptance and registration of the offer – The proposal letter is considered. On the basis of the information given in the submitted forms, it is decided that the proposed life insurance falls under which category and the level of risk is. Whether the offer letter is acceptable or not. If there is no deficiency in it, then the registration of that offer letter is done. In the registration register, the name of the proposer, amount of insurance, address, date of birth, code number of health checker, table number, code number of agent and development officer are written. After registration, a number is given to the proposer, the last three digits of which indicate the code number of the branch office. For example, 651765 registration number is given to the proposer, then 765 is the code of the branch and 651 tells the number of the offer. At the time of registration, the code number of the Agent and Development Officer is checked whether it is correct or not. After this, a “Proposal Review Slip” is also attached with the offer letter, in which key information related to whether or not to accept the insurance risk and premium etc. can be written.
- Decision regarding the proposal – The proposal should be registered. After leaving it is sent to the branch office or the divisional office.If the branch office does not have the right to decide on the proposal letter, then it is sent to the divisional office, otherwise most of the proposals are settled at the branch level itself. The branch office issues the receipt of the first premium and hands it over to the proposer.
- Acceptance of offer letter or writing a letter of apology – According to the decision taken by the branch office on the offer letter, acceptance letter is sent to the proposer or an apology letter is written. The premium amount deposited by the proposer is also returned along with the apology letter. With the acceptance of the offer letter, the insurance risk also starts.
- Preparation and dispatch of insurance policy – After accepting the proposal letter, the divisional office allots the insurance policy number to that proposal. Two copies of this insurance policy are prepared, out of which one copy is sent to the insured by registered post and the other copy is sent to the branch for office records. The policy is signed by the competent authority by affixing a Government stamp. It bears the common seal of the Life Insurance Corporation.