Formation And Validation Of A Life Insurance Contract

Contract is a legally enforceable agreement between two or more parties; the agreement consists of a promise or a set of promise. All of the parties have a legal duty to carry out the promises they made when they entered into the contract.Historically, the common law required that all contracts be formal written documents that include a seal, which is a particular mark that attests to the execution of the document. Today, According to principle of"freedom of contract", parties have the right to contract with whomever they choose and on what ever lawful terms they choose. Only a few types of contracts remain formal contract, e.g. contracts for the sale of real property. With certain exceptions, an informal contract may be expressed in either an oral or a written fashion.A life insurance policy is a policy under which the insurance company promises to pay a benefit upon the death of the person who is insured, or pay a benefit on a stated date if the insured lives until then. Life insurance contracts are informal contracts that require no special formalities to be valid. Insurance contracts typically are expressed in written form just for practical reasons. Issuing the written insurance policy to policyholder and putting the contracts in writing helps prevent misunderstandings between the insurer and policyholder as to the terms of their agreement, and a written contract provides a permanent record of the agreement, which may remain in force for many years.As an informal contract, a life insurance policy is enforceable when the parties reach a"meeting of the minds"concerning the terms of their agreement. The parties manifest their mutual intent to be bound to a contract by one party's making an offer to contract, which the other party accepted. After the establishing of the contract, the parties of a life insurance contract must meet special requirements to form a valid life insurance contract, including, the parties must mutually assent to the contract, they must have contractual capacity, the contract must be for a lawful purpose, etc.