They always argue that I shall someday die, which is not so
Uberrima Fides. The insurance contract must be entered into in utmost good faith by both parties (or uberrima fides if you will). The insured has a reasonable and just cause to assume something – that the company will pay promised. An agent has a fiduciary duty to the insured – he must act in the applicant’s best interest, based on the faith and trust placed on him/her by the public.
Insurance contracts are aleatory. In other words, the contract is dependent upon chance or uncertain outcome and one party may stand to gain more than the other party. For example, there can be an aleatory contract between an oil prospector and a landowner. In contrast, ordinary non-insurance contracts are cumulative in that the amounts exchanged are usually intended by the parties to roughly equal. Say you pay one premium payment on a property policy. You can receive hundreds of thousands of dollars should your property be destroyed. On the other hand, an insurance company can collect more in premiums than it ever pays out in benefits.
A life insurance policy is also a unilateral contract – or a personal contract. So only one party to the contract (the insurance company) is required to perform its obligations under the contract. The policy owner can discontinue paying premiums if he chooses to. However, if the premiums are paid, the insurance company must meet its obligations under the contract. The insurance company can’t demand that the policy owner continue paying premiums (even though they may like to).
The contract is also conditional. The insurance company’s obligation to pay any claim is subject to the policy owner performing certain acts (ex. Paying the premiums and furnishing proof of any claims.)
Is there a perfect life insurance contract? Tim Fussell of Fox Business explores this in his article aptly titled: “Is There Really Perfect Life Insurance Contract?”
Ready to find out which company and plan is right for you? Check out our Life Insurance page for a list of recommended providers.