The life insurance contract must
have all the essentials of a valid
contract. Certain elements like offer
and acceptance, free consent,
capacity to enter into a contract,
lawful consideration and lawful
object must be present for the
contract to be valid;
(ii) The contract of life insurance is a
contract of utmost good faith. The
assured should be honest and
truthful in giving information to the
insurance company. He must
disclose all material facts about his
health to the insurer. It is his duty
to disclose accurately all material
facts known to him even if the
insurer does not ask him;
(iii) In life insurance, the insured must
have insurable interest in the life
assured. Without insurable interest
the contract of insurance is void. In
case of life insurance, insurable
interest must be present at the time
when the insurance is affected. It is
not necessary that the assured
should have insurable interest at
the time of maturity also. For
example, a person is presumed to
have an interest in his own life and
every part of it, a creditor has an
insurable interest in the life of his
debtor, and a proprietor of a drama
company has an insurable interest
in the lives of the actors;
(iv) Life insurance contract is not a
contract of indemnity. The life
of a human being cannot be
compensated and only a specified
sum of money is paid. That is why
the amount payable in life
insurance on the happening of the
event is fixed in advance. The sum
of money payable is fixed, at the
time of entering into the contract. A
contract of life insurance, therefore,
is not a contract of indemnity.