Insurance Contract & Law of Agency

A life insurance policy is a contract, so it must satisfy the ordinary requirements of contract law. Five elements must be present for a valid insurance contract:

• •Offer and acceptance — there must be an intention to create a legal relationship and a 'meeting of minds'. In life insurance, the completed proposal form together with the first premium constitutes the offer, and the insurer's acceptance of the application and issue of the policy document constitutes acceptance (so cover commences only after acceptance and receipt of the first premium). An offer must be unconditionally accepted; a conditional acceptance is only a counter-offer, and an offer may be withdrawn before it is accepted. A brochure or advertisement quoting risks and rates is merely an invitation to treat, not an offer.
• •Consideration — something given in return. The premium is the consideration for the insurer's promise in the policy; the surrender value is the consideration for the owner giving up all rights under the policy.
• •Capacity to contract — the parties must be legally competent. The law limits the capacity of minors, persons under legal (mental) disability, drunken persons and undischarged bankrupts.
• •Insurable interest — the policy owner must have insurable interest in the life insured when the policy is issued.
• •Parties of the same mind (consensus ad idem) — both parties must be in complete agreement as to the subject matter and the risk. Because a life proposer knows personal facts of health, occupation and life risks the insurer cannot, the ordinary caveat emptor rule cannot apply — instead the law imposes utmost good faith (a duty owed by both sides).

Under the Civil Law (Amendment) Act 2009, a contract made by a minor who has attained has the same effect as if made by a person of full age. For insurance specifically, provides that a person over the age of does not, by reason only of age, lack capacity to enter an insurance contract, but a person cannot do so . The law gives a minor no right to assign, mortgage or surrender his policy, and a minor policy owner for policy money until reaching contractual capacity (18). A contract made by a person incapable of understanding it due to (Mental Capacity Act 2008) or is , provided the other party knew or ought to have known of the condition; a person who contracted while of sound mind is still bound, a drunken person may ratify on becoming sober, and necessaries supplied must still be paid for at a reasonable price. Once a person becomes an (Insolvency, Restructuring and Dissolution Act 2018), their interest in life policies — except certain protected policies under Section 73 of the Conveyancing and Law of Property Act 1886 and Section 132 of the Insurance Act 1966 — vests in the Official Assignee.