How to buy life insurance? This question relates to many of us. In this post we would like to explain some very important features of cheapest term life insurance contract.
Contract of Adhesion
Insurance is a contract of adhesion. This means that only one party, the insurance company, has prepared the contract. The insured “adheres” to the insurer’s contract. It is not drawn up through negotiation. The applicant only has the opportunity to accept or reject the contract. However, any ambiguity in the contract is resolved in favor of the insured.
Insurance is an aleatory contract. This concept refers to the fact that the values given by the two parties the insurance company and the insured are unequal. The premium paid is small in relation to the benefits to be collected. And payment of the benefits is dependent upon a fortuitous event. They will be paid upon a chance occurrence (such as a disability).
Insurance is a conditional contract in that the obligations of the insurance company hinge on the performance of certain acts by the insured and the beneficiary, such as payment of premiums and furnishing proof of death.
Contract of Utmost Good Faith
Insurance is a contract of utmost good faith. That is, both the insured and the insurer must know all material facts and relevant information. There must be no attempt to conceal facts or to deceive.
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Valued Contract vs. Reimbursement Contract
Life insurance is a valued contract in that it pays a stated amount (the face value) in the event of loss. In contrast, health insurance is a reimbursement contract; it merely reimburses for the amount of the loss.
SIS Life insurance is a unilateral contract. This means that, after the insured has paid the premium, only one party has any further obligation. The insurer promises performance: the payment of benefits in the event of loss.
Contract of Indemnity
Health insurance is a contract of indemnity. This means it is designed to compensate a policy owner for an actual covered loss. Its purpose is to return the insured to substantially the same financial position that he or she enjoyed prior to the loss.
The legal consideration for a life insurance contract consists of the statements made by the applicant in the application and payment of the initial premium. If the first premium has not been paid even though the application is signed by the applicant the necessary consideration is partially missing. If the premium has been handled by means of a promissory note, the note may be accepted as part of the consideration. There can be no contract without the full consideration.
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