Life insurance as a contract

A contract is an agreement enforceable by law. It is the means by which one or more parties bind themselves to certain promises. With a life insurance contract, the insurer binds itself to pay a certain sum upon the death of the insured. In exchange, the policyowner pays premiums.

For a contract to be legally valid and binding, it must contain certain elements: an offer and acceptance, consideration, legal purpose, and competent parties. 

Offer and Acceptance

To be legally enforceable, a contract must be made with a definite, unqualified offer by one party and the acceptance of its exact terms by the other party. In many cases, the offer of an insurance contract is made by the applicant when she submits the application with the initial premium. The insurance company accepts the offer when it issues the policy as applied for. In other cases — often after a health classification has been assigned through medical underwriting — the insurance company will not issue the policy as applied for. Instead, it may counteroffer with the issuance of another policy at different premium rates or with different terms. The applicant does not get to negotiate what has been decided in underwriting. He simply reserves the right to accept or reject the counteroffer.

If an applicant does not submit an initial premium with the application, the applicant is simply inviting the insurance company to make the contract offer. The insurer can respond by issuing a policy (the offer) that the applicant can accept by paying the premium when the policy is delivered.

People have been known to expire, or discover they are terminally ill, within days after securing life insurance. Once an insurance contract is in place and the insurance company has pledged to honor it, the company must make good on its promise to deliver. Eternal life insurance works the same way (Matthew 20:9).

God sets the terms of his own covenants. At the time of the Lord’s righteous judgment upon humanity, he asserted to Noah, (Genesis 6:18) “I will establish my covenant with you, and you shall come into the ark, you, your sons, your wife, and your sons’ wives with you.” The Lord declared to Abraham, (Genesis 17:1-2) “I am God Almighty; walk before me, and be blameless, that I may make my covenant between me and you, and may multiply you greatly.” Generations later, the Lord spoke to Moses, (Exodus 20:2) “I am the LORD your God, who brought you out of the land of Egypt, out of the house of slavery,” and he issued a series of commands, promising, (Exodus 19:5) “Now therefore, if you will indeed obey my voice and keep my covenant, you shall be my treasured possession among all peoples, for all the earth is mine.”

The Psalmists reverberated the Lord’s proclamation with the lyrics, (II Samuel 23:5) “For does not my house stand so with God? For he has made with me an everlasting covenant, ordered in all things and secure,” and (Psalm 89:3-4) “You have said, ‘I have made a covenant with my chosen one; I have sworn to David my servant: ‘I will establish your offspring forever, and build your throne for all generations.'”

Finally at the fulfillment of that promise, when Jesus arrived, he did not invite people to deliberate over the terms of uniting with God through the Son, but (Mark 1:14-15) “Jesus came … proclaiming the gospel of God, and saying, ‘The time is fulfilled, and the kingdom of God is at hand; repent and believe in the gospel.'”

Throughout the economy of the divine covenants, from the Covenant of Commencement (Adam), to the Covenant of Preservation (Noah), to the Covenant of Promise (Abraham), to the Covenant of Law (Moses), to the Covenant of the Kingdom (David), to the Covenant of Consummation (Christ), God always has dictated the terms of his agreement with his people. Individuals may reject the terms of God’s covenant (John 12:48, Acts 19:9, Hebrews 6:4-8), but we never can modify those terms to suit what we’re willing to pay, or give up, to be in covenant with God. The assertion of the Lord’s terms is as fixed as his security in fulfilling his covenant promises (Deuteronomy 32:4, Psalm 119:88-90).

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Covenant theology