A Closer Look at the Legal Aspect of Life Insurance

Life insurance is also legally binding contract and it is very important for the parties involved to full understand its legal aspect. For a certain contract to be effective, five criteria should be present and this is in accordance with the English Law. These five factors include:

· The insured or buyer should demonstrate and declare an insurable interest
· Both parties should have the capacity to enter into contract
· Both parties should demonstrate an interest to offer services and to accept said services
· Agreement in consensus or in Latin-- Consensus ad idem


Before the Life Insurance Act 1774 has made legal, life insurance policies did not carry out the requirement of having an insurable interest. During that period, purchasing a life insurance was considered a gamble for many, especially for the rich and the famous. To cease this practice, the Life Insurance Act of 1774 was established and in this law, a company should express an interest in the life of the policy holder. In 1854, there existed a case dubbed as Dalby v India and London Life Insurance Co. It was found out that the policy neither was nor regarded as an indemnity policy. This means that the interest was in existent by the time the policy was actually taken out.

It is also a requirement for both parties to have the capacity to sign a legally binding accord. On this note, it is highly prohibited that minors be allowed to take part in a contract as stipulated in Family law Reform Act of 1969. This is the main reason insurance providers do not issue any policy to people under 18 years of age. Another area of this requirement also focuses on the parties having sound mind. The Mental Health Act 1983 clearly states that someone of unsound mind should be handled by the court who will eventually assign someone to work on any affairs that concerns the individual.

All contracts should manifest the idea that someone offers a service and the other party subsequently accepts it. The invitation to treat is also stipulated in the English law which is basically about an advertisement. The insurers provide brochures to the public. The acceptance is manifested once the insurer agrees to the terms and conditions that are about to be written in the contract and after the very first payment of premium is done.

Consensus ad idem is carried out when he parties involved are in total agreement with the entire principles and provisions in the contract especially when it becomes into force. The history of this idea is based on a story of an individual who is very interested to purchase a boat while the other individual is very much interested in selling one. However, in this story there are two different boats but under the same name and both individuals was actually trying to sell and buy the opposite boats.

By knowing the legal aspects of the life insurance policy, it becomes much easier for one person to find and trust in the product.

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