Life Assurance

In the past, the purpose of life assurance was simply to provide a sum of money on the death of the life assured (i.e. the person on whose life a policy depends) to dependents. But over time, things got substantially more complicated and many policies were taken out for investment and tax planning purposes rather than pure life protection. Even with the change, all policies are still based on the production of a capital sum on death, whatever else they might provide.

Life assurance is a long-term contract and a chain must eventually occur whereas non-life assurance contracts are short-term agreements and claim may or may not occur.

A life assurance policy therefore can be said to be a contract between the assurer (i.e. the life office) and the assured (i.e. client). The contract is subject to the normal requirements of the laws of the contract for it to be valid. There are five requirements, all of which must be complied with for a life assurance contract to be legally binding. They are:- offer and acceptance, consideration, capacity to contract, legality of object and consensus-ad-idem (i.e. parties must be of the same mind).

Most life policies are single life (i.e. one-life policy). The assured is the same person who effects the policy and is the original owner. A life policy can also be on the life of another. In this instance, the assured and the life assured will be different people. This type is permissible if there is insurable interest. Lastly, policies can be effected jointly by two assureds e.g. husband and wife may effect a joint life policy with both of their lives on joint life first death or second death basis. Life assurance is classified into Individual and Group.