INSURANCE is a contract by which one party, generally an insurance company, undertakes, in consideration of certain yearly payments called premiums or of one lump sum, to indemnify another – the insured or policy-holder – against a stated risk by promising to pay the insured or his heirs, executors, adminis-trators, or assigns compensation whenever that event shall happen which is provided against, either the death of the insured person or loss incurred by him through fire, theft, or other cause. Assurance, now used as synonymous with insurance, is more strictly applied to contracts of life insurance.
A POLICY of life insurance may be for a whole life, in which case the insurer undertakes to pay whenever death happens; it may also be made for a stated period or for payment at a stated time or at death whichever first happen. Gambling policies are prohibited by statute, and it is not possible to effect insurance on a life in which a person has no insurable interest. In substance this means that anyone having a money claim against another or a legal right to support has an insurable interest.
A creditor may insure his debtors life, a servant may insure his master or a master his workmen. A married woman may effect a policy on her own life or on that of her husband for her separate use, and if she BO expresses it a policy taken out by her for her husband and children creates a trust for them. When a policy is taken out by a man and expressed to be for his wife and children a similar trust is created in their favour and the insurance moneys are not subject to his debts.
In the Life of his child a parent has no insurable interest, unless there is some pecuniary interest, as for example, where an adult child is maintaining the parent; nor has a child any insurable interest on the parents life unless they are supporting him. Relationship, apart from the relationship of husband and wife, does not give rise to an insurable interest. It is lawful to insure, however, against the expense of meeting the cost of burying a parent, grandparent, child, grandchild, brother, or sister.
Payments under the Friendly Societies Acts in respect of the death of a child are limited as follows: under three years of age a sum not exceeding £6; under six years of age not exceeding £10; under ten years of age, £15.
Concealment of Facts
Good faith is essential in all contracts of life insurance, which can be avoided by the insurer if there is concealment, misrepre-sentation, or non-disclosure of material facts. Verbal misrepresentation is enough, although it is stipulated specially that true answers be given to written inquiries. Concealment may take place after the proposal form for insurance has been completed. Where it was agreed that the insurance should begin on the payment of the premium and before that date the proposed policy holder contracted a serious disease which materially altered the risk, the court held that the company was not bound to grant a policy.
Questions Regarding Health
In all cases where the insurers allege con-cealmcn W a disease or risk it is incumbent upon them to prove that the insured person was aware of it, because an insidious disease creeps upon a man unawares. The greatest care should be exercised in answering questions regarding health, as any declaration that a man has not had a disease when in fact he has suffered from it years before avoids the policy.
In dealing with an insurance agent it is well to remember that without special authority from the company he has no power and that his duty is to forward the proposal form to his employers for acceptance or refusal. When there has been a breach in the condition of the policy and the agent, knowing of it, accepts a premium, it is deemed that his knowledge is the companys knowledge and the company is deemed to have waived the breach.
Payment of Premiums
THE contract of insurance becomes binding as soon as it is concluded and the risk commences from that time unless a contrary stipulation is inserted that it shall not begin until the day the first premium is paid. Subsequent premiums must be paid on the agreed date or within the period of grace allowed.
Non-payment is a breach of condition determining the contract, which can only be revived by special agreement, usually entailing the payment of a certain sum and fresh evidence of good health.
If a policy makes it a condition that premiums be made to one particular agent payment to another is bad.
Other common conditions are that no payment shall be made under the policy in case of death by suicide, or on the high seas or abroad, or while in the military service of the Crown. The return of premiums on the avoidance of the contract is provided for under the policy, and in case the policy holder finds himself unable to pay further premiums the company may offer him a lump sum to surrender it, acceptance of which cancels the contract, or a fully-paid-up policy for a smaller amount to be paid in case of death. Fraud by the insured party may lead to cancellation without return of the premiums.
The policy itself while in being is a valuable property which may be assigned for value or deposited as security for a loan. In the latter case it is a very slender security, for the deposit is only what is called in law an equitable mortgage, and the lenders claims can be defeated unless it is made clear that the intention is to give the assignee the benefit of the policy.
Assignment of Policy
In order to protect himself the assignee should insist on a proper deed of assign- ment and should give notice to the insurance company, which cannot dissent from the assignment, so that in the case of a second assignment his claim cannot be debated. Acknowledgment of the assignment signed by an officer of the company is conclusive evidence that the company has been notified. Assignments cannot be enforced unless properly stamped. No particular form is necessary to assign a policy and an endorsement of the policy is sufficient. Proof of Death Before payment is made on the policy the company must be shown proof of death. After disappearance for seven years without being heard of a person is presumed by law to be dead, but where a vessel in which the policy holder was travelling is lost with all hands, or where other evidence warrants it, death is assumed before that time. If on death the executors and one person or more claim under a policy as assignees the company can pay the money into the Court in order that a judicial decision may be given as to ownership.
Proof of ago is often required, so in order to prevent trouble arising later it is best to furnish this when the policy is taken out. The company usually endorse admittance of ago on the policy. On the bankruptcy of the assured the life policy vests in the trustoo in bankruptcy.
A CONTRACT of fire insurance is an agreement to indemnify against loss, from which it follows that the amount recoverable is limited to the actual loss, payable either by money or by reinstatement. If the insured person has other means of repairing his loss he must either cede them to the insurer or use them for the insurers benefit. Without the consent of the insurer a fire policy cannot be assigned.
A man agreed to buy a house which was covered under a fire insurance policy held by the vendor. Before completion the premises were partly destroyed by fire and the Court held that the purchaser had no claim to the insurance money or to have the building reinstated. Therefore on agreeing to purchase property it is well to make arrangement at once with the insurance company for protection either by an assignment of the policy with their consent or by a new policy.
Protected by Cover Note
A cover note is issued by the company on receipt of the proposal to insure and payment wholly or in part of the premium, and this is sufficient to protect the insured person against risk until the company decide to accept or refuse the proposal. It is essential that the person proposing to insure should have an insurable interest in the property, not only at the time of the insurance but also the time of loss, and he cannot recover more than the amount of his interest. Mortgagors and mortgagees have an insurable interest, so have the lessor and lessee.
Garages must be Noted
Many conditions are attached to fire policies and a breach of any of them, unless waived by the insurers, avoids the policy. It is important that the promises should be accurately described. Omission to state that there is a garage attached to a house, for example, or to state whether it is a detached building or part of the house is a material misstatement.
There is upon the insured person implied, an obligation to keep the premises unchanged throughout the duration of the insurance. Alterations which increase the risk should be brought to the attention of the company at once. Claims must be made in the time and manner stated with an inventory of goods destroyed. When insuring household goods, especially paintings of value, it is advisable to place a price on them and to inform the company, which may accept the valuation. This avoids disputes in case of a claim. The company will generally require notification of changes due to sales or part-purchases. Loss by Fire
T OSS by fire, the phrase usually used in – policies, means loss by actual ignition of the property and damage by water used to put out the fire or by throwing articles out of a building to escape the flames. Damage by the fire brigade in executing their duties is deemed to be within the policy. Explosions, except explosions due to coal gas, are generally specifically excluded from fire policies; attempts to claim compensation for damage caused by explosion due to other causes have failed.
After a fire the company have a right to enter the premises in order to ascertain the amount of the damage. Where a house is totally destroyed by fire the company may be required to devote the insurance money to be laid out in rebuilding the premises at the request of the person interested. No tenant, although liable for the rent, can force his landlord to lay out insurance money in rebuilding unless some contract specially so provides. In. the metropolis the tenant has statutory power to seek an injunction restraining the company from paying the landlord the money unless he gives security that he will rebuild.
BURGLARY insurance is a contract of – indemnity entitling the insured person to payment of his exact loss or replacement of the articles stolen. In some policies the goods are protected whether they are actually on the policy holders promises or not so that compensation may be claimed for loss by thefts at hotels or while travelling.
Householders are well advised to take out what is termed an all-in policy, which covers loss by fire or theft or by the act of God, i.e.. storm, floods, and so
POLICY for insurance against accident is not a contract of indemnity because the agreement is to pay money for disable-ment either in one lump sum or in weekly instalments until recovery. As no question of indemnity arises the company cannot set off against the insurance money any sum recovered by the injured person against the person causing the accident. In all actions for damages due to personal injuries the fact that either party is insured against accident is not disclosed to the jury. To become entitled to compensation it must be shown that the injury or death of the person was due to accident within the meaning of the policy. This question can only be decided upon the facts of the particular case. It has been decided that death from pneumonia or septicaemia resulting from an accident is accidental death, and when a person subject to fits fell into a stream while in a fit and was drowned the company was held liable under an accident policy.
A legal writer has defined accident as meaning an unlooked for mishap or an untoward event which is not expected or designed. Obviously, therefore, a reckless person who takes undue risks and brings about his own injury cannot recover. Where a man tried to cross a railway line at a place where there was no crossing and in front of an approaching train and was killed his executors failed in an action to enforce payment under an accident policy.
ANY person using a motor vehicle on a road without having in force an insur-ance policy against third-party risks either in his own namo or in the name of the owner of the car is liable to a penalty of £50 or three months imprisonment or both. A cover note is sufficient to protect against prosecution. Conviction brings disqualification for 12 months, at the discretion of the court and with the right of appeal to the quarter sessions. The policy must be issued by an authorized insurer or underwriter and must cover liability from death or injury caused by the use of the motor vehicle on a road.
Liability for injuries to the servant of the owner in the course of his employment, or to passengers carried free and not under contract, or any contractual liability need not be included in the policy, but it is obviously wiser to insure against such risks. Hospital charges for treatment to persons injured must be paid.
In order that the policy be effective it is necessary that a certificate of insurance be delivered to the insurer. Failure to produce the insurance certificate to a police officer when so requested is an offence. Persons who use private cars for hiring run a grave risk, for it has been held that in the event of accident they are not covered, the rate for commercial or contract vehicles being different.
Another decision of importance was that given in a case where the policy covered any car being used instead of the insured car. The old car was sold and it was held that as the insured person had no insurable interest in it a new car of the same type was not covered. Some policies make it a condition precedent to liability that the car be kept in an efficient condition. Breach of this exempts the insurers from liability and may result in grave expense to the insured person.