The efficient or effective cause which causes the loss is called proximate cause.
It is the real and actual cause of loss. If the cause of loss (peril) is insured, the insurer will pay; otherwise the insurer will not compensate.
In life insurance the doctrine of Causa Proxima (Proximate Cause) is not applied because the insurer is bound to pay the amount of insurance whatever may be the reason of death.
It may be natural or unnatural. So, this principle is not of much practical importance in connection with life insurance, but in the following cases the proximate causes are observed in the life insurance too.
(i) War-risk : Where policy is issued on exclusion of war and aviation risks, the proximate cause of death is important because the insurer waives its liability if death occurred, in this case, while the insured was in field or is engaged in operation of war and aviation. Only premium paid or surrender value whichever is higher is payable and the total policy amount is not payable.
(ii) Suicide : If suicide occurs within one year of the policy, or there was intention to commit suicide and the payment of policy would be restricted, only up to the interest of the third party in the policy provided the interest was expressed at least one month before the suicide.
(iii) Accident Benefit : A problem arises when an insured under an accident policy is killed or suffers an injury which has an immediate cause and also a remote cause. In accident benefit policy, double of the policy amount is paid. So, the cause of death in this policy is of paramount importance.