LAW OF OBLIGATION ACT, PART 4, CHAPTER 25

Chapter 25

LIFE INSURANCE

  • 532. Insurer’s performance obligation

In life insurance, the insurer shall, pursuant to the contract, pay the beneficiary the agreed amount as a lump sum payment or in instalments if the insured person attains a certain age, marries, dies or has a child.

  • 533. Restrictions on insuring life of third party

(1) A life insurance contract relating to the death of a third party shall only be valid if the third party grants written consent to the contract.

(2) If the third party is a person with restricted active legal capacity and the policyholder is his or her legal representative, the policyholder may represent the third party in the grant of consent only with the permission of the court of the residence of the third party.

[RT I 2009, 60, 395 – entry into force 01.07.2010]

  • 534. Consequences of stating incorrect age

If the age of the insured person is stated incorrectly and, as a result thereof, the insurance premium is established at too low a level, the liability of the insurer shall be reduced in proportion to the relation of the insurance premium corresponding to the actual age of the person to the insurance premium agreed upon.

  • 535. Increase in Probability of Insured Risk

(1) Only a change in circumstances relating to the insured risk which is explicitly deemed to be an increase in the probability of the insured risk pursuant to a written agreement shall be deemed to be an increase in the probability of the insured risk.

(2) The insurer shall not rely on an increase in the probability of the insured risk if three years have passed since the increase of the risk, unless the policyholder intentionally violated the obligation to obtain the consent of the insurer or to notify the insurer.

  • 536. Specifications of cancellation of contracts

A policyholder may at any time cancel a life insurance contract as of the end of the current insurance period.

  • 537. Appointment and change of beneficiary

(1) A policyholder has the right to determine a third party as beneficiary without the consent of the insurer and to change that person even if the beneficiary is specified in the contract.

(2) The beneficiary shall have the right to demand performance by the insurer only upon the occurrence of the insured event.

(3) If the beneficiary dies before the occurrence of the insured event, the insurer shall perform the obligation with respect to the policyholder or the successors of the policyholder unless the policyholder specifies otherwise.

  • 538. Several beneficiaries

If several persons have been appointed beneficiaries without their respective shares having been specified, they shall be deemed to be beneficiaries in equal shares. Any share which a beneficiary refuses to accept or cannot accept shall be added to the shares of the other beneficiaries.

  • 539. Release of insurer from performance obligation

In the case of insurance for the event of death, the insurer shall be released from its performance obligation if the insured person commits suicide within two years as of entering into the contract. The insurer’s obligation remains valid if the insured person who commits suicide has a pathological mental condition which precludes free will.

  • 540. Death of insured person caused by policyholder or beneficiary

(1) In the case of a life insurance contract entered into for the event of the death of a third party, the insurer shall be released from its performance obligation if the death of the third party is caused by an intentional unlawful act by the policyholder.

(2) If a beneficiary is appointed in a life insurance contract entered into for the event of death and the beneficiary causes the death of the insured person by an intentional unlawful act, the beneficiary shall be deemed not to have been appointed.

  • 541. Notification of insured event

(1) The insurer need not be notified of an insured event if the attainment by the insured person of a certain age has been agreed upon as the insured event.

(2) If a third party is entitled to performance of the obligation by the insurer, the third party shall give notice of the insured event and provide information and submit evidence concerning the insured event.

[RT I 2003, 78, 523 – entry into force 27.12.2003]

  • 542. Change in size of insurance premium

(1) An insurer has the right to increase an insurance premium if this is necessary to ensure continuous performance of its obligations arising from insurance contracts.

(2) The insurer shall not amend a contract solely on the grounds that the insured person is ageing or his or her state of health is deteriorating. The parties may, however, agree that, when the insured person attains a certain age, the initial insurance premium will be increased to an amount which, according to the relevant insurance premium rate, is payable with regard to an insured person who enters into an insurance contract at that age.

(3) Any declaration by the insurer which increases the insurance premium retroactively is void.

(4) An increase in the insurance premium shall not take effect earlier than one month after the policyholder is notified of the increase.

  • 543. Conversion of insurance into premium-free insurance

(1) A policyholder may apply for the insurance to be converted as of the end of the current period of insurance in such a manner that the policyholder need not pay any more insurance premiums during the period of validity of the contract but that the insurer shall still perform the obligation arising from the insurance contract on account of the insurance premiums already paid (premium-free insurance).

(2) The policyholder may demand that the insurance be converted into premium-free insurance if the minimum amount agreed upon by the insurer and the policyholder has been reached on account of the insurance premiums already paid. If the minimum amount of insurance premiums agreed upon has not been reached, the policyholder shall be entitled to receive the surrender value of the insurance from the insurer.

  • 544. Insurer’s performance obligation in premium-free insurance

(1) If insurance is converted into premium-free insurance, the extent of the insurer’s performance obligation as at the end of the current period of insurance shall be calculated according to the recognised principles of actuarial mathematics.

(2) If insurance is converted into premium-free insurance, the insurer may make deductions from its performance obligation only to the extent agreed upon by the parties, provided that such deductions are reasonable.

  • 545. Conversion of insurance into premium-free insurance if insurer cancels contract

(1) If the insurer cancels an insurance contract due to failure to pay the second or a subsequent insurance premium, the insurance is converted into premium-free insurance.

(2) In the case provided for in subsection 458 (2) of this Act, the insurer shall be required to perform to the extent which would have been the extent of the insurer’s obligation if the insurance had been converted into premium-free insurance by the time of the occurrence of the insured event.

(3) The notice which, pursuant to the provisions of § 458 of this Act, sets a term for payment of the insurance premium shall contain information which states that failure to pay the outstanding insurance premium in time will result in the insurance being converted into premium-free insurance.

  • 546. Surrender value

(1) If a life insurance contract terminates due to withdrawal or cancellation or if the contract is recognised as void or if one of the parties annuls the contract on the bases provided for in the General Part of the Civil Code Act, the insurer shall pay the surrender value of the insurance to the policyholder. This shall not apply if the parties agree to convert the contract into premium-free insurance.

(2) The insurer shall pay the surrender value even if the insurer has been released from its performance obligation after the occurrence of the insured event. The insurer need not pay the surrender value in the case specified in subsection 540 (1) of this Act.

(3) The surrender value of insurance shall be calculated according to the recognised principles of actuarial mathematics as at the end of the current period of insurance.

(4) Any insurance premium arrears shall be deducted from the surrender value upon calculation thereof. The insurer may make deductions from the surrender value only to the extent agreed upon by the parties, provided that such deductions are reasonable.

[RT I 2002, 53, 336 – entry into force 01.07.2002]

  • 547. Beneficiary becomes policyholder

(1) The beneficiary may replace the policyholder in an insurance contract with the consent of the policyholder if the policyholder’s claim against the insurer for the performance of the insurer’s obligation is seized or if an execution proceeding is initiated with respect to such claim or if the policyholder is declared bankrupt.

(2) Upon taking the place of the policyholder in the contract in the case provided for in subsection (1) of this section, the beneficiary shall satisfy the claims of the policyholder’s obligees to the extent of the surrender value of the insurance which the policyholder would have received from the insurer if the policyholder had cancelled the contract at the time of seizure, initiation of the execution proceeding or declaration of bankruptcy.

(3) If no beneficiary is named, the policyholder’s spouse and children shall have the rights and obligations provided for in subsections (1) and (2) of this section.

(4) Taking the place of the policyholder in the contract is effected by notifying the insurer thereof. Notice may be given within one month as of the time when the person who is entitled to take the place of the policyholder in the contract became aware of the seizure, initiation of the execution proceeding or declaration of bankruptcy.

(5) Any agreement which derogates from the provisions of subsections (1) to (4) of this section to the detriment of the beneficiary is void.

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