DIPLOMA IN INSURANCE SERVICES
MODULE - 2
Notes
Essentials of Insurance Contract
Principles of Insurance
40
(b) An advertisement in the newspaper about the availability
of different life Insurance policies is an invitation for an
offer. If a proposer makes an application then it will be
offer from the applicant and the Insurance company may
or may not accept it.
(c) An offer may be considered accepted either when the
Insurance company issues the policy or the first premium
is paid by the applicant.
As stated above in example (a) if the applicant pays the first
premium of Rs.100/- to the Insurance company then the
contract is completed as both the parties have accepted the
offer.
Similarly, if the company issues the policy in above stated
example (b) then the offer is accepted by the Insurance
company & the contract is completed. In fact, in life Insurance
contract the effective date of the policy is very important; when
the premium is paid with the application but no conditional
receipt is issued the contract is not in force until the policy is
delivered to the applicant. The payment of the premium with
the application constitutes the offer and the delivery of policy
is its acceptance.
Further, if the premium is paid with the application &
conditional receipt is issued, the effective date of the contract
depends upon the provisions of the conditional receipt. There
are three types of conditions as follows:
(a) The condition may be that the Insurance becomes
effective as of the date of the application or medical
examination whichever is later. A claim arising after this
date will be paid even if the application papers have not
reached the competent / Approving Authority, provided
of course, that the facts on the application & the results
of the medical examination are such that the company
would have accepted the application had the applicant
lived.
(b) The second type of conditional receipt used by a company
is the approval form, which provides coverage beginning
with the date the application is approved by the company.
This form does not offer the insured protection for the
period from the date of the application until it is approved
by the company.