Life Assurance is defined in Smith’s Mercantile Law ‘as a contract by which the insurer, in consideration of a certain premium, either in gross sum or by annual payment undertakes to pay to the person for whose benefit the insurance is made, a sum of money or annuity, on the death of the person whose life is insured.’
It therefore follows, that a life assurance contract is not a contract of indemnity, but is a contract for the payment of specific money, as the loss of human life cannot be measured in money.
The amount assured by a policy of life assurance is payable according to agreement, either on the death of the life assured, or on the expiry of a certain number of years. Life insurance attracts businessmen because income-tax
exemption is allowed on the premiums paid upto one-sixth of the person’s income.
Nomination
ADVERTISEMENTS:
In order to avoid delay and trouble later, the assured may nominate a person or persons to whom the policy should be paid in the event of his death. The nomination may be incorporated in the text of the policy itself or by an endorsement of the policy with communication of this fact “to the company.
A nomination will automatically be cancelled if an assignment is made of the same policy. The distinction between assignment and nomination is important. An assignment operates as a transfer and cannot be cancelled as the transferred becomes personally entitled to the benefits under the policy, but a nomination can be changed or cancelled as it is made only for convenience in collection of the amount, as the person named is not entitled personally to the benefit.