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?
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 Smart360 Term Plan
iSelect Smart360 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 Smart360 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 Smart360 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.
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.