To Buy: 1800-258-5899 (9 am to 6 pm)



Locate Branch

Search Button

How Life Insurance Policy is Not a Contract of Indemnity?

dateKnowledge Centre Team dateMay 27, 2021 views112 Views
Life Insurance Policy | Contract of Indemnity

Are you wondering why life insurance is not a contract of indemnity? Perhaps you want to learn the difference between them. With a mere 2.82% of India's population having life insurance coverage, it becomes essential to ensure that people are fully informed about its features and essence. Keep reading this article to understand the concepts of life insurance and indemnity contract and how they are different.

What is a Contract of Indemnity?

Elaborated in section 124 of the Indian Contract Act, a contract of indemnity is a contract between 2 parties or people where one party promises to indemnify the other party in case the promised party suffers from any loss or incurs any expenses or to protect them against any legal consequences which were caused by a third party or the promiser (first-party) himself.

For example, if A states that he shall compensate for the losses incurred by B by the act of a third party. So, the whole point of an indemnity contract is that it is a commercial contract that protects the affected party from any loss or liability incurred.

What is Life Insurance?

To define life insurance, we can say that it is a contract between an insurance policyholder and an insurance company where the insurer pays the promised amount of money in exchange for a premium. It is received upon the death of the insured person or after a set period.

Understand what is life insurance premium?

Life Insurance Policy | Contract of Indemnity

The life cover is then given to support your family or loved ones in case of an unfortunate event.

Difference between Contract of Indemnity and Life Insurance

There is a significant difference between a contract of indemnity and life insurance as life insurance is a contract of guarantee instead. However, only a handful of people are aware of the same. To help understand the difference better, below are some pointers which highlight their differences.

  • Both indemnity and life insurance policies present coverage for losses to an insured party in exchange for premiums up to a specific limit. Life insurance, though, renders a lump-sum payout to the designated beneficiaries when an insured party dies. Unlike a contract of indemnity, the payout, referred to as a death benefit, is the total amount of the policy—not for the amount of a claim itself.
  • Fire and marine insurance contracts, in common, are contracts of indemnity; that is, they present for paying the insured for loss or damage sustained. Life insurance, though, establishes an exception to the general rule.
  • Life insurance is only a contract to pay a certain sum of money on the death of a person (or on maturity), considering the payment of a certain sum of money at periodical intervals. The insured merely pays the premium to the insured to secure a certain sum payable to him or his representatives in case of death—money at periodical intervals.
  • Life insurance does not relate to a contract of indemnity because the insurer does not promise to indemnify the insured for any loss on maturity or death of the insured but agrees to pay a sum assured in that case. A policy of insurance on a person's own life is not an indemnity as it is solely a contract to pay a specified sum, known as Sum Assured, in the case of death.

The insured pays the premium to the insurer to secure a certain sum payable to him or his representatives in the event of death. There is no inquisition of indemnification in such a matter, for the loss occurring from death cannot be measured in terms of money. Life insurance is chosen as a method of saving; the concept of indemnity is unknown to it.

Now that you're clear about how life insurance is not a contract of indemnity, if you're looking for some life insurance policies, here are some of the best life insurance policies. These are provided by Canara HSBC Oriental Bank of Commerce Life Insurance.

Insurance Plans by Canara HSBC Oriental Bank of Commerce Life Insurance

Canara HSBC Oriental Bank of Commerce Life Insurance has brought to you two of the most beneficial life insurance plans to safeguard your family's future. Providing some exceptional benefits, they are an ideal choice for you!

1. Invest 4G Plan

Here are some of the features and benefits of Invest 4G, which is a ULIP. The plan helps you customize it as per your changing goals. Apart from that, it gives you complete control over your savings by allowing you to manage your investment portfolio. In simple terms, Invest 4G is a plan that you can use for your saving and investment purpose.

I. Flexibility of choosing to pay for entire policy term or for limited years or only once.

II. Mortality Charges deducted during the Policy Term for Regular and Limited Premium Paying policies will be added to the Fund Value at maturity.

III. Premium Funding Benefit under Care Option to ensure your targeted savings contributions are made even in your absence.

IV. Loyalty Additions and Wealth Boosters during the policy term as additional allocation of units to boost your investments.

V. Systematic Withdrawal Option to create additional income stream during the policy term.

VI. Milestone Withdrawal Option for enhanced liquidity at regular milestones.

VII. Multiple Portfolio Management Options to enable you optimize returns from the Policy as per your investment preference.

2. iSelect Star Term Plan

iSelect Star Term Plan is an online term plan that can be used as a shield against all uncertainties of life. It is a highly flexible plan that offers return of premium option that can be really beneficial when you outlive the policy term. All the premiums you have paid throughout the policy term will be paid back to you. Here are some features and benefits of iSelect Star Term Plan:

I. Choose from various options of coverage, premium payment and benefit payouts aligning the plan to your needs

II. Option to cover for a limited period or for your entire lifetime

III. Option to augment cover through additional inbuilt coverages like Accidental Death Benefit, Child Support Benefit, Accidental Total and Permanent Disability Benefit

IV. Option of adding Spouse in same policy with a discount on the rates for the Spouse

V. Multiple premium payment options including single bullet payment for entire term or payment for a limited duration of 5/10/15/20/25 years or pay only during your working years i.e. till you turn 60 years besides payment throughout the Policy Term

VI. Multiple options to receive benefits as lump-sum, monthly income or part lump-sum part monthly income with the option to choose both level / increasing income

VII. Increase your life cover with changing life stages and protection needs in the same plan by augmenting cover at key life milestones

VIII. Tax benefits may be available on premiums paid and benefits received as per prevailing tax laws

Both of the plans provide separate benefits. Invest 4G Plan is specifically designed for the provision of regular income. In contrast, the iSelect Star Term Plan provides option to cover spouses in the same policy. However, what you pick, depends on your needs and wants.

Life Insurance is your one-stop solution in hard times. Getting a life insurance policy is now an easy and hassle-free process. One can get the policy they desire by purchasing it online. However, it is imperative to understand its essence and features as an informed decision is the best decision.

Learn how to buy a life insurance policy online.

A life insurance policy likewise safeguards your family against any unforeseen possibility, and it is the best tool to protect their future, even when you're not there. Choosing a life insurance policy is not so complicated. By opting for a policy from a massive assortment of life insurance policies by Canara HSBC Oriental Bank of Commerce Life Insurance, one can stay ahead of the future while also receiving the best possible benefits.

Take a step towards safety and sustainability by choosing Canara HSBC Oriental Bank of Commerce Life Insurance today.

Related Articles

Browse by Categories

Get a Call Back

Do you want us to call back Please fill the form below

Annual Income (In Lacs)

Our Products

TERM Insurance PLAN

TERM Insurance PLAN

Whole life cover option available

Increase your life cover with changing life stages

Return of premium & in-built protection options

Multiple premium payment options

Avail tax benefits on premiums paid as per tax laws


Unit Linked Insurance Plan

8 funds and 4 portfolio strategies to invest

Loyalty additions and wealth booster

Return of Mortality Charge is available on Maturity under all three cover Options

Flexibility of switching between the fund options to take benefits of market movements or change in risk preference

Pos Easy Bima Plan

Top Benefits

Hassle free

Get double life cover in case of accidental death

Choice of flexible premium payment and policy term

Avail tax benefit on premium paid

Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

Call BackCall Back Pay PremiumPay Premium