| Basic Principles of Life Insurance in India | | | | Consensus of agreement: |
| First of all a life insurance policy is a contract | | | | The parties basically must be in agreement about |
| between the insured and the insurer. In life insurance | | | | what they are contracting for at the time the |
| the insurer usually makes the offer by telling the | | | | agreement comes into force. |
| insured that he has accepted the proposal and is | | | | Insurable interest: |
| willing to offer insurance, based on a set policy and | | | | The life insurance proposer, the person taking the |
| subject to the first premium being paid. The insured | | | | policy out, must have an ‘insurable interest' in the |
| then usually accepts that offer when the insured | | | | Life Insured. |
| pays the first premium. | | | | Capacity to contract: |
| According to rules there are five basic requirements | | | | Both parties must be able to contract. Minors under |
| for a contract which are as follows: | | | | the age of 18 years are restricted by the Family law |
| 1. Consideration | | | | Reform Act 1969. Minors under the age of 18 can |
| 2. Consensus ad idem | | | | enter into a contract but subject to certain |
| 3. Insurable interest | | | | restrictions the contract can not be enforced against |
| 4. Offer and acceptance | | | | them. That is why most insurers will not issue a policy |
| 5. Capacity to contract | | | | to someone under the age of 18. |
| Consideration: | | | | Offer and acceptance: |
| The insured's consideration is the first payment of | | | | One party makes an ‘offer' and the other party |
| premium and then after that the continuing payment | | | | accepts that offer without qualification. If the |
| of premium. The insurer's consideration is the offer to | | | | acceptance is qualified it simply becomes an |
| pay out the sum insured if the life insured was to die | | | | alternative offer. |
| during the policy period. | | | | |