Page 255 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes 12.12 Meaning of Life Insurance

Many definitions of life insurance contract have been given from time to time by learned
persons, scholars and in the insurance legislation as under:
"A contract of life insurance is that in which one party agrees to pay a given sum on the happening
of a particular event contingent upon the duration of human life, in consideration of the immediate
payment of a smaller sum or certain equivalent periodical payments by another."
– Bunion
"Life Insurance contract may be defined whereby the insurer, in consideration of a premium
paid either in lump sum or in periodical instalments, undertakes to pay an annuity of a certain
sum of money either on the death of the insured or on the expiry of a certain number of years."
– R.S. Sharma
"A contract of Life Assurance is that in which one party agrees to pay a given sum on the
happening of a particular event contingent upon the duration of human life in consideration of
the immediate payment of a smaller sum or certain equivalent periodical payments by another."

– Bunyon's Law of Life Insurance
"Life insurance business is the business of effecting contract upon human life."
– Insurance Acts

An untimely and premature death of the bread-earner brings economic disaster to the dependent
family.

Three ways are suggested to remove problems of economic security viz.,
Social security schemes: The government can have some social security schemes for the socially
and economically backward sections of the society i.e., for people below the poverty line. The
Government of India has already introduced such schemes. But social security to all is an objective
which is still very far. The few schemes already planned are also lacking in execution.

Group efforts: This can be made available through Group Life/Accident/Health Insurance
Schemes. But these are mostly limited to a few groups in the organized sector and therefore not
widely prevalent. Normally the big business houses provide such schemes and that too to the
permanent staff.

Individual efforts: A person makes his own personal financial plan and decides where he would
like to invest his savings. Several instruments are offered by the public sector and private sector.
One instrument best suited to meet all kinds of risks and disasters is Life Insurance.
Miles M Dawson wrote in his book The Business of Life Insurance, "There is nothing more uncertain
than life and nothing more certain than Life Insurance". Hence among all the above security
measures life insurance is the best guard for an individual and his family. The importance of
insurance must be made known to all. If this is done the distress of an individual and his family
though inevitable will get minimized.

12.13 Salient Features of Life Insurance

Some of the features of Life Insurance are mentioned below:
1. Instrument of savings
2. Provides social security.

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