Introduction
Insurance Policy is a standard legal agreement between an individual and the insurance company entered to confer protection (financial coverage) as promised by the insures to insured against the contingencies. Today, it has developed into insurance with investments. The insurance company takes the risk of providing a high cover for a small premium because very few people end up claiming the insurance. The details about the contingencies under which the Insurance Company shall be made liable to pay out the insurance amount to whether the insured person or the nominees is set in any regular insurance policy cover.
The different types of insurance policies are available. Broadly the policies can be classified as for life and non-life. However, a more rational classification of the insurance policies shall be life or general insurance products. The General insurance policy covers health insurance, motor insurance, home insurance, fire insurance and travel insurance. And the life insurance covers term life insurances, whole life insurance, endowment plans, unit-linked insurance plans, child plans and pension plans. The insurance agreement is based upon the principle of Uberrimae fidei, principle of insurable interest, indemnity (contribution or subrogation), loss minimization and causa proxima.
Insurance is a way of protecting yourself and your family members from a financial loss. Here, the insurance company takes the risk of providing high cover for a small premium because very few insured people end up claiming the insurance making it easy to get the insurance for big amount at a low price. Any individual or legal entity can seek insurance form an insurance company, but the decision to provide the insurance is at the discretion of the insurance company. It is only after the insurance company evaluates the claim application to make a decision, the insurance can be granted.
Generally, insurance companies refuse to provide the insurance to high risk applicants and to the claims that are misrepresented or concealed or not disclosed completely. In the case of LIC vs. Shakuntalabai, the insured availed life insurance policy from LIC. Before taking policy, he had suffered from indigestion for a few days and at the first instance had availed the treatment from an ayurvedic doctor. This fact was not disclosed to the insurer. The insured later within a few months of buying the policy died of jaundice. Eventually, LIC refused to accept the claim on the ground of non-disclosure of information. However, this claim of LIC was rejected by Court as the casual ailments are common and one cannot distinguish a potentially serious ailment inherent in such symptoms. therefore, these facts are not to be considered as material to the contract and thus, their non-disclosure does not invalidate the contract.
An insurance policy being a legal contract legally enforceable if properly executed in a court of law. should satisfy all essentials of a valid agreement set under Indian Contract Act, 1872. We know that “insurance is the subject matter of solicitation”. It suggests that insurance policy is sought by the person who wants to buy it from insurer. It is to be solicited or purchased by the consumer on voluntary basis. Here, insurance company is providing you insurance against a risk on your request/solicitation i.e. the company agreed to sell you its insurance policy after you solicited or asked for such a sale.
The proposal for insurance agreement is offered by the insured and accepted by the insurer. It is an agreement between the parties where the acceptance of the conditions and circumstances is set to provide protection to the insured from the contingent mishaps and financial risks against the fixed premium expressed in the agreement. A consideration as premium is paid by the insured under the agreement. The parties entering into the agreement are legally competent in the eyes of law to enter into agreement. They are not lunatic or minor rendering the agreement if entered, void/ voidable. The consent of the parties in every insurance agreement entered into must be free and should not be coerced upon or threatened, unduly influenced, deceived or misled in a manner which would nullify the agreement.
The subject matter of the agreement must always be real and legally enforceable such as protection against the future loss or risks. Moreover, the insurance policies completely follow the principle agent relationship set in the Indian Contract Act, 1872 whereby, an agent (insurance agent) is a person employed to do any act for another or to represent another in dealings with the third persons. For example: if an insurance agent misrepresents to customer while selling an insurance product, the insurance policy may become voidable at the option of the policyholder.
A standard insurance agreement is not similar to that of a wager, though it is performable on an uncertain event. The principle of insurable interest present in the insurance agreement distinguishes the insurance agreement from a wagering contract. Insurable interest, nothing but the interest which one has in the safety or preservation of the subject matter of insurance. In the absence of insurable interest, it becomes a wagering contract. The terms and conditions set in the insurance agreement are extended further by the warranties set in the agreement where the insurer protects the insured voluntarily or at the instance of the insurer from something that will determine the insurability of the risk.
LIFE INSURANCE POLICIES
A risk coverage plan that sets the post death benefits for the insured is classified as life insurance policy. The companies providing life insurance policies are LIC, Max Life Insurance Co. Ltd., Pramerica Life insurance Co. Ltd., Bajaj Allianz Life Insurance Co. Ltd., etc. These further can be classified into various policies depending in the coverage provided by insurer and amount of contribution made by the insured.
Under Term Insurance plans to save the family members from future mishaps and ensure financial freedom after death people opt for Life Insurance. It is the simplest and affordable life insurance plans that you can buy. The insurance policies also help to plan your retirement. It confers coverage for death risk for a specified period with high coverage at low premiums. In case the insured passes away during the policy period, the life insurance company pays death benefit to the nominee. The benefit is payable after death as lump sum, monthly payouts or a combination of both.
However, there is no payout if the life assured outlives the policy term but companies these days are offering term plans with return of premiums where insurance companies payback all the paid premium amount in case the life assured outlives the term period. These plans are costlier than normal term insurance plans. Another life insurance policy is Endowment Plan whereby, the portion of premiums paid goes toward the death benefit, while the remaining is invested by the insurance provider. It is a long-term financial planning and an opportunity to earn returns on maturity. On death the amount is payable to the nominee under death claim.
The Unit Linked Insurance Plans or ULIPs insurance policies are similar to the endowment plans, here a part of insurance premium goes toward mutual fund investment while the remaining goes toward the death benefit. In Whole Life Insurance, life coverage is offered for whole life of an insured, instead of a specified term. Some insurers restrict the whole life insurance tenure to 100 years. The child’s plan is an investment cum insurance policy, that provides financial aid for children throughout their lives. In this the death benefit is available as a lump-sum payment after the death of parents. The Money – Back insurance policy pays a certain portion of the amount paid in premium after regular intervals. At last but not the least, Retirement Plan, also known as pension plan, a portion of premium goes toward creating a retirement corpus for the policy holder. This is payable as a lump- sum or monthly payment after the policyholder retires.
GENERAL INSURANCE POLICIES
The next is the General insurance whereby insured can avail a coverage for damages, third party losses, death is occurred through this insurance policy. The first in line is the Health insurance policy that provides financial assistance to policyholders against medical expenditures. The insured can avail it when they are admitted to hospitals, or if treated at home. There are number of health insurance policies that provide coverage including Individual Health Insurance Policy, Family Floater Insurance, a health insurance for whole family together. Critical Illness cover, Senior Citizen Health Insurance, Group health Insurance, Maternity Health Insurance, Personal Accident Insurance and Preventive Healthcare Plan. These broadly covers the treatment or medical bills incurred in any medical facility availed by the insured.
Another is Travel Insurance whereby an insurance policy can be pulled out by the insured against the losses incurred during travel. It is a short- term cover to ensure financial safety of traveler. It covers the loss of baggage, trip cancellation, cancellation of hotel bookings, loss due to flight delay, reclaim lost travel documents, etc.
Motor Insurance, a policy drawn by the insured against the loss of life, third party damages, financial assistance to repair the vehicle, theft. It can be availed for car, two-wheeler, any commercial vehicle, etc. Similar to this is the Cycle Insurance covering the losses occurred to the cycle, accidental death benefit, protection against fire and riots.
Lastly, we have Property Insurance whereby, home insurance, office insurance, building insurance and shop insurance policies can be drawn for the protection against a property damage. The insurance policies cover the protection against fire, burglaries, floods and other natural calamities. On similar terms person can obtain the Mobile Insurance against the loss to mobile if occurred any.
TAX BENEFITS UNDER THE INSURANCE POLICIES
Insurance policies holders enjoy certain tax benefits over other non- holders. Here, under Section 80 C of the Income Tax Act, premiums paid by the Assessee (insured) on policies held by him is eligible for deductions from gross total income. Premiums payable under all types of Health insurance plans are considered as tax deductions under Section 80 D of the abovementioned Act. A maximum of Rs 25,000 for self, wife and children and additional 25,000 for parents having age below 60 years (the tax savings can go up to Rs 50,000 for senior citizens individual and 50000 if parents are senior citizens) tax deductions can be availed under health insurances. Total deduction can go up to 1 Lakh. Also, section 80CCC and 80 CCD of the Act provides tax benefits upon pension products whereby any individual Assessee (insured) who has paid premiums out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or nay other insurer for receiving pension he or she will be allowed a deduction in the computation of his total income.
GENERAL PROCEDURE FOR CLAIM SETTLEMENT UNDER INSURANCE POLICIES
The insurance policies follow a standard contract drafted by the insurer, the benefit of doubt is always in favor of the insured, as a principle of natural justice. As per the contra preferentum rule, wherever the contractual language is capable of alternative interpretations, it will be construed or translated in favor of the insured, who accepts the standard contract. Accordingly, in insurance agreement the printed and written part has to be construed together as far as possible, in other ways the policy is to be interpreted as a whole, in case of contradiction the written portion over-rides the printed portion, the words in the agreement are to be given their plain, ordinary and popular meaning. Technical words are to be given their technical meaning and the ordinary grammar rules have to be applied.
Under any insurance policy, on the occurrence of peril or risk that causes damage to the insured property, the insurance company has to be intimated to by the insured. The insurance company evaluates if the policy has been issued to insurer and correct premium has been received by the insurer and if the peril causing loss/damage is an insured peril. On being satisfied about the presence of necessary elements of insurance, it then initiates the claim processing. However, if the insurance company is not satisfied of the existence of insurance it may repudiate the claim as per approved process.
After finding the existence of successful insurance policy, the insurance company later appoints surveyor, loss assessor and investigator to assess the actual loss suffered in money terms and that which can be indemnified in terms of contract, advise the insurer regarding compliance of the various terms, conditions and warranties under the contract, etc. The loss assessor also has to advise the client on various aspects of loss mitigation, limitation, salvage. The insurer has to ensure the claims are settled on the receipt of the final report from the surveyor, generally within the turnaround time stipulated by various regulations and committed by the insurance company. The insurance company at last or finally will initiate the process of recovery from erring party/ third person who is party to the insurance agreement before the competent jurisdiction.
REFERENCES
https://www.coverfox.com/life-insurance/articles/types-of-life-insurance-policies/
https://life.futuregenerali.in/life-insurance-made-simple/life-insurance/different-types-of-life-insurance-in-india
https://cleartax.in/s/general-insurance
This Article is written by Shriya Kesharwani, Law Student at Gujarat National Law University.
Also Read – How To File Complaint Against An Insurance Company?
