| This is intended as a very brief introduction to this | | | | restricted by the Family law Reform Act 1969. Minors |
| subject. First of all a life insurance policy is a contract | | | | under the age of 18 can enter into a contract but |
| between the insured and the insurer. In English law | | | | subject to certain restrictions the contract can not be |
| there are five basic requirements for a contract which | | | | enforced against them. That is why most insurers will |
| are as follows, | | | | not issue a policy to someone under the age of 18. |
| - Offer and acceptance; | | | | Generally you can not enforce a contract against |
| - Consideration; | | | | some one of unsound mind if you knew they were of |
| - Capacity to contract; | | | | unsound mind when you contracted with them. Under |
| - Insurable interest; | | | | the Mental Health Act 1983 the affairs of a person of |
| - Consensus ad idem, which in English means a | | | | unsound mind can be placed into the hands of the |
| consensus of agreement. You were both contracting | | | | court of Protection who can then appoint someone to |
| about the same thing. | | | | handle affairs on their behalf. |
| Offer and acceptance. In English law under a contract | | | | The Life Insurer must be authorised under the Financial |
| there is offer and acceptance. One party makes an | | | | Services and Markets Act 2000 in order to issue |
| 'offer' and the other party accepts that offer without | | | | policies of life insurance in the England. |
| qualification. If the acceptance is qualified it simply | | | | Insurable interest. The life insurance proposer, the |
| becomes an alternative offer. There is also under | | | | person taking the policy out, must have an 'insurable |
| English law something called an invitation to treat. That | | | | interest' in the Life Insured. Prior to the Life Insurance |
| is basically an advertisement. Insurers issue out their | | | | Act 1774 this was not the case and many people |
| prospectus and brochures. They are not offers in their | | | | would take out life insurance policies on famous or |
| own right. You could not go into the insurer's office and | | | | notorious people as a form of gambling. The Life |
| hand over your cheque for the policy shown in the | | | | Insurance Act 1774 put a stop to this. The act requires |
| advertisement. | | | | the proposer to have an insurance interest in the life |
| In life insurance the insurer usually makes the offer to | | | | insured and that the level of insurance taking out must |
| contract by telling the insured that he has accepted the | | | | not exceed the value of that insurable interest. |
| proposal and is willing to offer insurance at a set sum, | | | | Courts will usually hold that a person has an unlimited |
| based on a set policy and subject to the first premium | | | | interest in their own life and that of their spouse. In an |
| being paid. The insured then usually accepts that offer | | | | 1854 court case called Dalby v India and London Life |
| when the insured pays the first premium. | | | | Insurance Co it was held that a life insurance policy |
| Usually when a life insurer make their offer they make | | | | was not a policy of indemnity, and so the insurable |
| it subject to the first premium being paid by a certain | | | | interest only had to exist when the policy was first |
| date and that until the first premium is paid the life to | | | | taken out. |
| be insured should remain in the same state of health. | | | | Consensus of agreement. The parties basically must |
| So if once you get the insurers offer, your health | | | | be in agreement about what they are contracting for |
| deteriorates before you pay the first premium then the | | | | at the time the agreement comes into force. The |
| life insurance contract may not be valid. You would | | | | original idea came from a case where one party was |
| need to discuss that with your insurer. | | | | selling a boat and another person was buying a boat. |
| Consideration. There needs to be consideration on | | | | Unfortunately there were two boats with the same |
| both sides. This applies to all contracts which are not | | | | name and each party thought the other party was |
| under seal. The insured's consideration is the first | | | | talking about a different boat. |
| payment of premium and then after that the continuing | | | | In life insurance this area of law has been extended by |
| payment of premium. The insurer's consideration is the | | | | the idea of 'utmost good faith'. Courts believe that the |
| offer to pay out the sum insured if the life insured was | | | | insured has all the knowledge about themselves and |
| to die during the policy period. | | | | the insurer has none. The insured therefore under |
| Capacity to contract. Both parties must be able to | | | | English Law has the duty to advise the insurer of all |
| contract. Minors under the age of 18 years are | | | | material facts. |