Life Insurance Basics and Contract Law
This domain tests contract law applied to insurance: offer and acceptance, consideration, capacity, free consent and legality, plus the documents that record the bargain.
Formation of the contract
The proposal form is the offer; acceptance occurs when the insurer issues the policy, often after medical or financial underwriting. The premium is consideration. Parties must have capacity (age 18, sound mind), consent must be free from fraud, misrepresentation, undue influence or mistake, and the object must be lawful.
Special features
The policy document is evidence of the contract, not the contract itself. An agent can solicit and collect a proposal but cannot accept the risk, alter terms or waive a condition. A free look period of 15 days (30 days for distance marketing) lets the policyholder return the policy for a refund.
Worked example
A 17-year-old signs a proposal, pays ₹15,000 and receives a policy. On death, the insurer refuses to pay. A minor lacks capacity, so the contract is void. The premium is refunded, but there is no death benefit. Checking age proof at proposal would have avoided the dispute.
Traps
Saying the agent's acceptance binds the insurer; treating a premium receipt as the policy; confusing the free look period with a cancellation right at any time; forgetting that a void contract gives no benefit.