Who can purchase life insurance?

Life insurance at the operational level is a Contract. It can be purchased by anyone who is competent to contract and who possesses ‘insurable interest’ on the life to be covered. Let us see each of these in a little detail.

A contract in India is governed by the Indian Contract Act, 1872.  A legally binding agreement is a contract.  There has to be an agreement and it shall be legally enforceable.    To be enforceable, an agreement must be coupled with obligation.

When two minds meet upon a common purpose – there is an agreement. In other words two persons mean the same thing with the same sense at the same time. This is also called consensus ad idem. An obligation is a legal duty to do or abstain from doing, what one has promised to do or abstain from doing. A contract is an exchange of promises by two or more persons resulting in an obligation to do or refrain from doing a particular act, which obligation is recognized by law.

An offer and acceptance of the offer create an agreement. An offer, its acceptance plus obligation create a contract. The obligation is also called consideration.  All contracts are agreements. But all agreements are not contracts.

To constitute a contract the parties must intend to create a legal relationship. The law of contracts is the law of those agreements, which create obligations, and those obligations, which have their origin in agreements. Agreement is a genus of which contract is a species.

A offers to sell his car to B at a price of Rupees One lakh. B accepts A’s offer. Now contractual rights and obligations are created between A & B.

A is under an obligation to deliver the car to B.

B has a corresponding right to receive the car.

B has an obligation to pay Rupees One lakh to A.

A has a corresponding right to receive Rupees One lakh from B.

Key words:

Life insurance
Contract
Agreement
Consideration