Life assurance is subject to the general principles of Law (either English or Scottish) as is any other commercial activity. There are, however; special legal principles that apply to life assurance and many are based on the Law of Contract. Two or more parties must enter into a contract before there is any insurance provided.

A life assurance contract is an agreement that one party (the insurer) will pay a sum of money, called the sum assured, on the happening of a special event, usually the death of an individual or the survival of the individual to the end of a specific term. In return the individual (the insured) will pay an immediate smaller payment or a series of regular smaller payments called premiums.