Home >> Dictionary Of Banking >> Guardians Of The Poor to Or Mandate >> Life Policy_P1

Life Policy

payable, death, premiums, insurable, premium and assured

Page: 1 2

LIFE POLICY. 1 life policy, duly assigned, forms a good banking security to the extent of the surrender value. The longer it exists the more valuable it becomes.

If a debtor gives a security in which he has merely a life interest, it should be supported by a life policy.

A policy may be either a " whole life assurance "—that is, not payable till the death of the assured ; or an " endowment assurance "—that is, payable when the assured has arrived at a certain age, or pay able at death if it occurs before that age is reached—or simply an " endowment "—that is, payable on the insured surviving to a certain age. An assurance may be effected merely for a temporary period—called a " short term " policy—and is payable only in the event of death occurring within the period agreed upon.

A policy may be in favour of the assured, or in the case of a husband in favour of his wife or children, or two lives may be assured under the one policy the sum being payable upon the first death, or in other policies on the death of the survivor of the two lives.

The Married Women's l'roperty Act, 1882, provides that an assurance effected by a man on his own life for the benefit of his wife or children, or of his wife and children, or effected by a woman on her own life for the benefit of her husband or children, or hus band and children, shall create a trust in favour of the objects named and the moneys payable shall not form part of the estate of the insured or he subject to his or her debts ; provided that if it be proved that the policy was effected with intent to defraud the creditors they shall be entitled to receive out of the moneys payable under the policy a sum equal to the premiums so paid.

By the Gambling Act. 1774 (14 Geo. III, c. 481, no insurance shall be made by any person on the life of any person unless he has an insurable interest in that person. The interest must be a pecuniary one. For example, a wife has an insurable interest in her husband's life, and a man in his own life, but a son has not an insurable interest in his father's life (if the son is of age and therefore nut legally entitled to maintenances and a father has no insurable interest in his child. A guarantor has a pecuniary interest

in the debtor for whose debt he is surety, and a policy by the surety upon the debtor's life is valid. The policy continues valid after the pecuniary interest has ceased.

The question of " insurable interest " does not apply to a person to whom a policy is assigned ; it applies only to the parties to the original contract.

The fact that a policy has been issued does not necessarily imply that the regulation regarding the insurable interest has been observed by the company.

The premium is the amount payable in order to assure the payment of the sum named in the policy at death or at the end of a certain period. This premium may take several forms. It may consist of a single large payment, or of annual payments for a certain number of vears, or of a pay ment every year, or half-year, until death.

A " paid up " or " complete " policy is one where there are no further premiums payable.

There is a " half-credit " system with regard to premiums, by which only a half of the premium due is paid, the other part remaining as a debt upon the policy and being payable with interest out of the policy moneys at death.

There is also the " half-premium " system, where the premiums are arranged to exclude the debt and interest of the half-credit system. In either case there is no surrender value during the time of the low premiums, usually for the first five years, and conse quently such policies do not form a banking security during that period.

There is also a scheme under which policies are issued with premiums arranged on an ascending scale, the premium increasing according to the length of time the policy has been in existence.

Premiums are usually payable within thirty days (called the " days of grace ") from the due date, and, if death occurs within that time, before payment of the premium, the sums assured and bonuses are paid in full under deduction of the overdue premium.

Page: 1 2