Proposal accepted on terms other than those proposed

There come proposals that cannot be accepted on standard rates of the insurer for obvious reasons, viz. higher risk than that assumed on a standard life. Consider these examples (i) a proposer aged 22 years is overweight by, say 5% (ii) a proposer aged 50 years is overweight by 15% (iii) a proposer aged 25 years is underweight by 20% (iv) a proposer aged 50 years is underweight by 5% (v) a proposer has lost his left eye in an accident.

Each of the cases referred to above can be discussed. (i) Being overweight at younger ages is not a bad feature. So he can be considered a standard life if all other features are favourable. (ii) Being overweight at higher ages increases risk, of diabetes/blood pressure/heart ailments etc especially when the family history shows reference to these illnesses. An extra risk may be met through an extra premium or through a reduced term or through offering a Plan with less risk cover. Instead of offering the requested Plan with benefit of  three times the sum assured on death the insurer may offer a Plan with single sum assured on death. Or the insurer may offer a reduced sum assured. (iii) Being underweight at younger age is a bad feature. But being underweight at higher ages is a good feature. In other words this proposer is getting free of extra risk as his age increases. His proposal can be accepted with a reducing lien. A lien on a policy is insurer’s right on a claim (iv) Being under weight at higher age is a favourable feature. If other features of the life are favourable he seems to be a standard life. (v) ‘One eye lost’ is an extra risk factor. This extra risk may be met by charging an extra premium.

The above cases represent simple examples where extra health risk is met through extra premium or terms other than those requested for by the proposer. There are cases where extra risk comes from occupation. Such cases are met through extra premium or by putting an exclusion clause that the insurer will not cover the risk arising out of engaging in one’s official duties.

These are examples of cases where proposals are accepted on conditions other than those that are proposed. Here what the insurer does is making a counter offer (to the proposer). The proposer, by giving his consent, is accepting the counter offer.