Life Insurance Act 1978

Summary

This Act is Bermuda's core statute governing contracts of life insurance between insurers and policyholders. It sets out mandatory contract formation and disclosure rules, prescribes what information a policy or group certificate must contain, and establishes statutory protections for insureds and beneficiaries (incontestability, reinstatement, non-forfeiture of instalments, insurable interest, and remedies through the Supreme Court). It applies to life insurance contracts made in Bermuda or expressed to be governed by Bermuda law, entered into after the Act's commencement in 1978.

• Policy issuance and content: An insurer must issue a policy for every contract and must include prescribed particulars (insured details, sum insured, premium terms, surplus participation, reinstatement conditions, surrender/loan options); group policies and group certificates have their own prescribed content requirements.
• Duty to disclose: Applicants, the person whose life is insured, and any person consenting to the insurance must disclose all facts material to the insurance; failure or misrepresentation makes the contract voidable by the insurer, subject to the incontestability rules.
• Incontestability: After a contract has been in effect two years during the insured's lifetime, non-disclosure or misrepresentation (absent fraud) no longer renders it voidable; separate two-year rules apply to group insurance and disability claims.
• Premium payment and grace period: Overdue premiums may be paid within a grace period of 28 days (or the longer period specified in the contract) without lapsing the policy.
• Reinstatement: An insured whose contract has lapsed may apply for reinstatement within two years by paying overdue premiums with interest and providing satisfactory evidence of insurability; the insurer must then reinstate the contract, subject to exceptions.
• Age mis-statement: If age is mis-stated, insurance money is adjusted to what the premium would have purchased at the correct age; where the contract limits insurable age, it becomes voidable by the insurer within 60 days of discovering the error, but not later than five years after the contract took effect.
• Beneficiary and insurable interest protections: The Act governs designation, revocation and irrevocable designation of beneficiaries, protects insurance money from creditors, and requires an insurable interest at the time a contract takes effect (subject to exceptions for group insurance and written consent).
• Court powers: The Supreme Court may make declarations as to proof or presumption of death, stay proceedings, order payment into court, and award compensation for breach of the Act's provisions.

The Act does not apply to superannuation or pension schemes (with limited exceptions) or to Workmen's Compensation Act payments, and only governs contracts made after its 1978 commencement.

Key obligations

• An insurer entering into a contract of life insurance must issue a policy to the insured.
• An insurer must set out prescribed particulars in the policy (or, for group/creditor's group insurance, in the group policy and group certificate).
• An insurer must, upon request, furnish the insured or a claimant with a copy of the application.
• Applicants, the person whose life is insured, and any person consenting to the insurance must disclose all facts material to the insurability that are within their knowledge.
• Overdue premiums (other than the initial premium) may be paid within a grace period of 28 days from the due date, or the longer period specified in the contract, to keep the contract in force.
• An insured seeking reinstatement of a lapsed contract must apply within two years, pay overdue premiums and indebtedness with interest, and provide satisfactory evidence of insurability, after which the insurer must reinstate the contract.
• An insurer may avoid a contract for mis-stated insurable age limits only within sixty days of discovering the error, and not later than five years after the contract took effect.
• A contract cannot be treated as voidable for non-disclosure or misrepresentation (absent fraud) once it has been in effect for two years during the insured's lifetime.

Applies to

insurers, life insurance policyholders (insureds), beneficiaries, fraternal societies, group insurance providers and group life insureds, creditor's group insurance providers

Deadlines

• 28 days from and excluding the day on which the premium is due: Grace period within which an overdue premium may be paid to keep the contract in force, unless the contract specifies a longer period.
• two years: Incontestability period after which a contract cannot, absent fraud, be voided for non-disclosure or misrepresentation.
• two years: Period within which an insured must apply for reinstatement of a lapsed contract.
• sixty days after the insurer discovers the error: Period within which an insurer may void a contract for mis-statement of age exceeding an insurable age limit.
• five years from the date the contract takes effect: Outer limit during which a contract may be voidable for mis-statement of age exceeding an insurable age limit.
• 13 June 1978: Assent date and effective commencement point; the Act applies only to contracts made after this commencement.