Termination of a Health or Life Insurance Contract and the Consequence

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Termination of a Health or Life Insurance Contract and the Consequence
Termination of a Health or Life Insurance Contract and the Consequence

Termination of a Health or Life Insurance Contract can follow a False Statement given to the Insurer which allows the Insurer to nullify the Contract.

Another form of termination can be made by under Section 894 of the Civil and Commercial Code, which states:

“The Insured is entitled, at any time, to terminate the Contract of Insurance by discontinuing to pay the Premium.  If the Premium has been paid for at least 3 years, he is entitled to receive from the Insurer the Surrender Value of the Policy or Paid Up Policy”.

By the above provision, the Insured can easily terminate the Contract by stopping payment of the Premium with two possible consequences.

  1. In a case when the Insured has paid the Premium for less than 3 years consecutively, there is no cash value of the Policy consequently the Insured cannot get any cash back and cannot change the Policy to be a Paid Up Policy.
  2. If the premium has been paid for more than 3 years, there is a cash value in the Policy which can be paid back to the Insured or the Insured can request that the Policy is changed into a Paid Up Policy. This means a reduction to the benefit in compliance with the paid amount of the Premium and the insurance will continue until the expiry date of the Contract.

The two different results are a consequence of the Cash Value of the Policy.  By law after paying premium for three consecutive years a cash value has been created which will increase as long as you keep paying.  It will be equal to or more than the final benefit on expiry of the Insurance Contract.

The Insured can use the Cash Value for his interests as follows:

  • To get paid the Cash Value on termination
  • To change the Policy to become a Paid Up Policy by using Cash Value as a Premium
  • To extend the Insurance Period by using the Cash Value to pay the Premium of the Extension
  • To use the Cash Value to pay the Premium when cash flow is insufficient for some payment
  • To use the Cash Value as a Loan Security with the Insurance Company

I hope the above information will give you some idea for making use of your Cash Value with the Insurance Company.

© Jatupon Cherbangkaew

Executive Partner / Chief Lawyer

Website : www.actahuahin.com

email: actahuahin@gmail.com

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