Life assurance is a legal product. It is an agreement or contract between the insured and the insurer. This contract is not a common deal but it is enforceable by the law. Insured pays the premiums and the company provides various benefits to him/her. Life insurance is chosen according to the needs and goals of the insured. The main objective of insurance is to help the insured and his/her family members at the time of crisis. Life insurance covers various things like accidents, illness or even death.
When we talk of legal aspect of the Life insurance policy, it is significant as both the parties are bound to follow the legal rules. As the proper compliance from both the sides makes it is functioning smoothly. Everything is put in writing, whether it is from the insured sides or insurance company. Requirements of insurable interest, legal form, and contents, misstatement of age, dividend clause, modes of settlement, automatic premium loan, name or changing the name of nominees etc. are all in written form.
The insurance company also provides the facility of free look period and during this period life insurance policy owner can terminate the policy without penalties. Generally, it lasts 10 or more days. During this period policyholder have the right to terminate if he or she finds it unsuitable or is not satisfied with it. In this period buyer can seek for more information about the policy. In fact, this period provides an opportunity for the policyholder to review the policy and its various aspects.
We have seen that the ultimate power rests with the policyholder; he/she can gift the policy. He/she can give the policy to his spouse or to the parents or to the children. Likewise, an employer can gift it to its employees or his/her relatives like a spouse or the child. The spouse has the insurable interest on each other’s lives. In the business, the creditor is permitted to take the policies.
Guaranteed survival benefit is a benefit given to the policyholder during or upon completion of the policy period.
There is a suicide clause in this case death benefit cannot be given to the policyholder’s nominee. According to the suicide clause, the policy shall be void if the life assured commits suicide.
Thus it is a bilateral contract that is to be honored by both the parties. Though this agreement is subject to revision, negotiation, etc. and once the agreement is reached then it is to be followed from both sides.