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Life Insurance

Features Of Life Insurance Contracts

The important features of an life insurance contract are:


Rule of insurable interest

For an insurance contract to be valid, the proposer should have insurable interest in the subject matter of insurance. Insurable interest implies that the proposer should benefit financially by the continued existence of the insured life or should be put into financial loss by the loss/damage/death of the subject matter insured.


In life insurance, insurable interest should exist at the time of entering into the contract. Further, in life insurance it is the owner of the policy and not the beneficiary who should possess insurable interest. However, it is quite possible that the owner and the beneficiary are the same though it is not mandatory.
Insurable interest can be for -


  • Self;
  • Parents; 
  • Assets;
  • Children; and
  • Our spouse.

Doctrine of utmost good faith 

In all legal contracts, it is essential that the parties to the contract exercise good faith. However, in insurance the emphasis is on utmost good faith which should be exercised by the insured. As the insured alone has complete information about the subject of insurance, he should reveal all the facts to the insurer. In case of breach of this condition the contract becomes void .


What are common clauses in insurance contracts?


The insurance contract contains the following clauses :- 


Declaration section where the insured declares that the information provided by him is true to the best of his knowledge.

  • The operative clause which describes the insured and the extent of coverage.
  • Exclusions under the policy.
  • Conditions which need to be fulfilled for the cover to be valid.

Riders and endorsements which are not standard part of the policy but can be covered subject to extra premium. The term rider is used in Life policies. A common rider is accidental death also called double indemnity, whereby if death occurs due to an accident, the claim amount payable is double the face value of the policy.

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Units 7/35