Q.4 What Is Life Insurance? Discuss its principles and procedure of getting the life Insurance policy?
According to Sec. 2 of the Insurance act life insurance business means “The business of effecting contracts upon human life, it includes:
1. Any contract whereby the Payment of many is assured upon death (except death by accident only) or the happening of any contingency dependent on human life.
2. Any contract which is subject to the payment of premiums for a term dependent on human life.
3. Any contract which includes the granting of disability and double or triple indemnity accident benefits, the granting of annuities upon human life, and the granting of superannuating, allowances.”
The objective of life insurance is to provide the financial protection to dependents when the earning member dies.
PRINCIPLES OR ESSENTIALS OF OF INSURANCE
ü ABSOLUTE GOOD FAITH The principal of absolute good faith is applied in the life insurance. Both the parties should disclose every fact before each other. Insured person should also provide the correct information about his health. It is a personal contract between insurer and insured.
ü INSURABLE INTEREST For the validity of insurance contract life insurance must be supposed by an insurable interest. At the time of policy taking it must be present in life insurance. For example a husband has insurable interest on his wife and wife has also on husband. Insured amount is definitely paid in the life insurance policy. Principle of indemnity is not applied in life insurance.
PROCEDURE OF GETTING THE POLICY
Following method is applied:
ü PROPOSAL FORM The person who wants to be insured should fill the form of proposal. He will provide the various information like name, profession, health condition, date of birth, heirs name etc. he should write true facts otherwise contract will be invalid.
ü MEDICAL EXAMINATION As the insurance company receives the proposal form, proposer will be medically checked up. After receiving the doctor’s report proposal will be considered.
ü ACCEPTANCE OF PROPOSAL If the company is satisfied then it accepts the proposal and asks the proposer to deposit the premium. After the payment of premium insurance contract completes.