A policy of life assurance is neither more nor less than a wager made between the person whose life is insured and the company who insures it. The fact that it is a wager does not, however, render the transaction illegal, and make the contract void. But no insurance can be made by any person on the life of another unless, the person for whose sake the policy is made has an interest in that life.
Every man is presumed to have an interest in his own life; that is to say, a pecuniary interest, for if it could be shown that the man was insuring his life with another person's money, and for their benefit, the policy would be void. At the same time, a creditor has an interest in the life of his debtor, and even after his debt has been paid may still have a claim against the company if he has kept up the payment of the premiums.
A husband is not presumed to have an interest in his wife's life, but a wife has an insurable interest in the life of her husband; and if he effects a policy on his own or on their joint lives, which, on the face of it, is expressed to be for the benefit of his family, it creates a trust for them. A married woman can now effect a policy on her own or her husband's life for her separate use.
When a settlement of the policy is made in this fashion, the insured may by the policy, or by a memorandum under his or her hand, appoint trustees of the money payable under the policy, making provision for the appointment of a new trustee, or trustees, and for the investment of the money.
Husband Killed by Wife
When a man insured his life for the benefit of his wife, who was convicted of having murdered him, the Court would not allow the money to be held in trust for her, as being contrary to public policy, and it was held that the money belonged to his estate, and that his personal representatives were entitled to recover the sum insured from the company.
An insurance by a father in his own name on the life of his son, unless he has some pecuniary interest in it, is void. But a son has an insurable interest in the life of a father who supports him, and a surety in the life of his principal. Although the interest may have ceased at the time of his death, if it existed at the time of the entering into the contract, the insurance office will be bound to pay the money.
People who wish to effect an insurance on their lives have, as a general rule, to submit to a medical examination by a doctor acting on behalf of the insurance office; and they have also to fill up a form, in which they are bound to describe all material facts affecting themselves as regards their health, age, family history, and so forth. A material fact is one which, if brought to the notice of the company, would result either in their declining to effect the insurance, or only effecting it on condition of an increased premium beyond the ordinary rates of payment. In other words, a material fact is an increase of risk which ought to be communicated to the company.
Immaterial and unintentional errors may render a policy void if it is a condition of the policy that the questions shall be answered truly. Great care, therefore, should be exercised in filling up the forms and answering the questions.
The consideration paid by the assured is called the premium, and is generally an annual payment, which may be paid quarterly, or a sum payable for a limited number of years, and sometimes it is a sum of money paid down.
Proof of age should be supplied at the time of effecting the insurance, and if accepted, an endorsement to that effect should be made on the policy. This may be the means of saving a great deal of trouble hereafter.