|The nature of life insurance is divided into two types- Financial and Legal.
Through life insurance, a person makes financial provision to protect his life and his dependents from the danger that may arise due to uncertain events in the future, such as sudden premature death, accident, disability, illness, old age, etc. Financial uncertainty is caused by many factors. Life insurance is the single best way to reduce such financial uncertainty. Life insurance is a long-term contract and the policyholder buys insurance for financial protection only for investment purposes. In short, the insured buys life insurance by paying the premium in financial form. Under this contract, the insurance company provides financial protection to the insured’s family after the death of the insured during the lifetime of the insured. A person’s needs do not decrease as income decreases in old age. In such cases, life insurance is an important way to get regular income. Through life insurance, it is possible to provide for children’s education and marriage expenses, as well as to deal financially with sudden crises like illness, accident, disability of a person.
Life insurance is also a contract. One party (the insurance company) agrees to pay a certain amount to the heirs of the other party (the insured) in return for the premium paid by the insured at a time fixed in the contract or after his death. Provisions of Contract Act apply to life insurance. That is why it is important to look at its legal form. It includes:
- Written agreement
- Contract eligibility
- Lawful purpose
- Mutual trust
- Contract fulfillment
- Free consent