As enacted

Contents

Regulation of Insurance Industry Act 2000 · As enacted · Part IV · Long Term Insurance Business

40. Acquisition of surrender value by policy

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

(1)

Where, in terms of a policy of long term insurance business, the policy is to mature upon survival to a fixed date or on the death of such person, and the policy is subject to payment of premia at an uniform rate for a fixed term or where the death occurs before the expiry of such fixed term, until the date of such death, and all premia have been paid for three consecutive years, the policy shall be deemed to acquire a surrender value, and, notwithstanding any contract to the contrary, shall not lapse by reason of non-payment of further premium, but shall, notwithstanding such non-payment, be kept in force to the extent of its paid-up value.

For the purpose of this subsection, the method to be used to calculate surrender values and paid-up values, shall be certified by an actuary.

(2)

Where a debt owing to an insurer is secured by a policy of long term insurance business issued by the insurer and, under subsection (1), the policy is kept alive to the extent of its paid-up value, the insurer—

(a)

may treat the debt as a debt secured by the policy so kept alive, and thereupon the policy so kept alive shall be a security for the debt ; or

(b)

may reduce the amount of such paid-up value by an amount the present value of which is equal to the amount of the debt, and thereupon the debt shall cease to be owing to the insurer.

(3)

This section shall not apply in any case where —

(a)

the sum assured is payable only on the happening of a contingency which may not arise ;

(b)

the paid-up value of the policy is less than such amount as is determined by the Board from time to time ;

(c)

after default has occurred in the payment of the premium, the parties agree in writing to some other arrangement ; or

(d)

the surrender value of the policy is automatically applied under the terms of the contract for maintaining the policy in force notwithstanding the non-payment of premia.

Read on from s 41

Part V