INSURANCE
Insurance claim can be rejected if policy lapsed on account of non-payment of premium: SC
Nov-02-2021

The Supreme Court has stated that an insurance claim can be rejected if the policy has lapsed on account of non-payment of premium. It also stressed that the terms of an insurance policy have to be strictly interpreted. The apex court observation came while setting aside an order of the National Consumer Disputes Redressal Commission (NCDRC) that ordered additional compensation in a road accident case. A bench of Justices Sanjiv Khanna and Bela M Trivedi said it is a well-settled legal position that in a contract of insurance there is a requirement of Uberrima fides i.e. good faith on the part of the insured.

The bench said ‘It is clear that the terms of insurance policy have to be strictly construed, and it is not permissible to rewrite the contract while interpreting the terms of the policy’. The top court was hearing an appeal filed by the Life Insurance Corporation (LIC) against the judgement of the NCDRC that had set aside the order passed by the State Commission.

In the case, the woman's husband had taken a life insurance policy under the Jeevan Suraksha Yojana from the Life Insurance Corporation under which a sum of Rs. 3.75 lakh was assured by LIC. Besides this amount, in case of death by accident an additional sum of Rs. 3.75 lakh was also assured. The insurance premium of the said policy was to be paid six-monthly, however, there was a default in payment.

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