The actual form of the life insurance policy has not changed a great deal over the years.
The policy is a contract between the policyholder and the company, made on the basis of the proposal form in which the prospective policyholder has to give such information as the company may require (accuracy is essential here if the contract is to be vali.
In return for the payment of the specified premiums, the company guarantees to pay the sum assured plus, where relevant, bonuses, to the policyholder (or whoever he wishes to name) at the specified maturity date or on the policyholder's earlier death.
The difference between life insurance and general (motor, household and other risks) insurance is that, having made the contract, the company is bound by it and cannot refuse to accept future premiums if, say, the policyholder's health deteriorates.
Life insurance is a long-term contract, whereas general insurances are renewable at the option of both parties and the premium rate may be adjusted as the insurer thinks fit.
There are certain legal restrictions on the capacity to be insured.
One may insure the life of another person only if he has a financial interest in that person's death or surviv.
This condition used to be applied very strictly, to the extent that a man might not, for example, insure the life of his father. However, this rule is now more liberally interpreted and some offices would allow a man to insure the life of his father to provide for the CTT that would become payable on his father's death.
Unless some similar financial interest is established, a parent may not insure the life of a child (except under certain industrial assurance policies to provide for funeral........ see: click here for Tax Relief
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