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FINANCE ACT, 1973
Policies of Life Insurance
Rules applicable to endowment policies
1. An endowment policy is a qualifying policy if it satisfies the following conditions:
(a) the term specified in the policy in relation to survival must be a term ending not earlier than ten years after the making of the insurance,
(b) premiums must be payable under the policy at yearly intervals or at intervals of six months, three months, two months or one month, and—
(i) until the happening of the event upon which the capital sum secured is payable, or
(ii) until the happening of that event, or the earlier expiry of a specified period shorter than the term specified but also ending not earlier than ten years after the making of the insurance, or
(iii) if the policy is to lapse on the death of a specified person, until one of those times or the policy's earlier lapse,
(c) the total amount of the premiums payable under the policy in any period of twelve months must not exceed—
(i) twice the total amount of the premiums payable in any other such period, or
(ii) one-eighth of the total amount of the premiums which would be payable if the policy were to continue in force for the specified term,
(d) the policy must guarantee that the capital sum payable on death will be equal to three-fourths at least of the total premiums which would be payable if the policy were to continue in force for that term, disregarding any amounts included in those premiums by reason of their being payable otherwise than annually, and
(e) the policy must not secure the provision (except by surrender) at any time before the happening of the event aforesaid of any benefit of a capital nature other than benefits attributable to a right to participate in profits or arising by reason of a person's disability.
2. In applying paragraph 1 to any policy—
(a) no account shall be taken of any provision for the waiver of premiums by reason of a person's disability, and
(b) if the term of the policy runs from a date earlier, but not more than three months earlier, than the making of the insurance, the insurance shall be treated as having been made on that date, and any premium paid in respect of the period before the making of the insurance, or in respect of that period and a subsequent period, as having been payable on that date.
3. References in paragraph 1 (d) to a capital sum payable on death include references to any capital sum, or series of capital sums, payable by reason thereof; and a policy secures a capital sum payable either on death or on disability notwithstanding that the amount payable may vary with the event.
Exceptional mortality risk
4. For the purpose of determining whether any policy is a qualifying policy, there shall be disregarded—
(a) so much of any premium thereunder as is charged on the grounds that an exceptional risk of death is involved, and
(b) any provision under which, on those grounds, any sum may become chargeable as a debt against the capital sum guaranteed by the policy on death.
5. Where the terms of any policy provide that it is to continue in force only so long as another policy does so, neither policy is a qualifying policy unless, if they had constituted together a single policy issued in respect of an insurance made at the time of the insurance in respect of which the first-mentioned policy was issued, that single policy would have been a qualifying policy.
Premiums paid out of sums due under previous policies
6. (1) Where, in the case of a policy under which a single premium only is payable, liability for the payment of that premium is discharged in accordance with subparagraph (2), the policy is a qualifying policy notwithstanding anything in paragraph 1 (b) or paragraph 1 (c) and where, in the case of any other policy, liability for the payment of the first premium thereunder, or of any part of that premium, is so discharged, the premium or part shall be disregarded for the purposes of paragraph 1 (c).
(2) Liability for the payment of a premium is discharged in accordance with this subparagraph if it is discharged by the retention by the company with which the insurance is made of the whole or a part of any sum which has become payable on the maturity of, or on the surrender more than ten years after its issue of the rights conferred by, a policy—
(a) previously issued by the company to the person making the insurance, or, if it is made by trustees, to them or any predecessors in office, or
(b) issued by a company when the person making the insurance was an infant, and securing a capital sum payable either on a specified date falling not more than one month after his attaining the age of twenty-five years or on the anniversary of the policy immediately following his attainment of that age,
being a policy which was itself a qualifying policy, or which would have been a qualifying policy if issued in respect of an insurance made on or after the 16th day of May, 1973.
Substitution, variations, etc.
7. (1) Where one policy (hereafter referred to as the new policy) is issued in substitution for, or on the maturity of and in consequence of an option conferred by, another policy (hereafter referred to as the old policy), the question whether the new policy is a qualifying policy shall, to the extent provided by the rules in subparagraph (2), be determined by reference to both policies.
(2) The said rules (for the purposes of which, the question whether the old policy was a qualifying policy shall be determined in accordance with this Schedule, whatever the date of the insurance in respect of which it was issued) are as follows—
(a) if the new policy would apart from this paragraph be a qualifying policy, but the old policy was not, the new policy is not a qualifying policy unless the person making the insurance in respect of which it is issued was an infant when the old policy was issued, and the old policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining the age of twenty-five years or on the anniversary of the policy immediately following his attainment of that age;
(b) if the new policy would apart from this paragraph be a qualifying policy, and the old policy was also a qualifying policy, the new policy is a qualifying policy unless—
(i) it takes effect before the expiry of ten years from the making of the insurance in respect of which the old policy was issued, and
(ii) the highest total of premiums payable thereunder for any period of twelve months expiring before that time is less than one-half of the highest total paid for any period of twelve months under the old policy, or under any related policy issued less than ten years before the issue of the new policy (“related policy” meaning any policy in relation to which the old policy was a new policy within the meaning of this paragraph, any policy in relation to which that policy was such a policy, and so on);
(c) if the new policy would not apart from this paragraph be a qualifying policy, and would fail to be so by reason only of paragraph 1 (b) or 1 (c) it is nevertheless a qualifying policy if the old policy was a qualifying policy and—
(i) the old policy was issued in respect of an insurance made more than ten years before the taking effect of the new policy, and the premiums payable for any period of twelve months under the new policy do not exceed the smallest total paid for any such period under the old policy, or
(ii) the old policy was issued outside the State, and the circumstances are as specified in subparagraph (3).
(3) The said circumstances are—
(a) that the person in respect of whom the new insurance is made became resident in the State during the twelve months ending with the date of its issue,
(b) that the issuing company certify that the new policy is in substitution for the old, and that the old was issued either by a branch or agency of the company outside the State or by a company outside the State with whom the first-mentioned company has arrangements for the issue of policies in substitution for ones held by persons coming to the State, and
(c) that the new policy confers on the holder benefits which are substantially equivalent to those which he would have enjoyed if the old policy had continued in force.
8. (1) Subject to the provisions of this paragraph, where the terms of a policy are varied, the question whether the policy after the variation is a qualifying policy shall be determined in accordance with the rules in paragraph 7, with references in those rules to the new policy and the old policy construed for that purpose as references respectively to the policy after the variation and the policy before the variation, and with any other necessary modifications.
(2) In applying any of those rules by virtue of this paragraph, the question whether a policy after a variation would be a qualifying policy apart from the rule shall be determined as if any reference in paragraphs 1 to 5 to the making of an insurance, or to a policy's term, were a reference to the taking effect of the variation or, as the case may be, to the term of the policy as from the variation.
(3) This paragraph does not apply by reason of—
(a) any variation which, whether or not of a purely formal character, does not affect the terms of a policy in any significant respect, or
(b) any variation effected before the end of the year 1973 for the sole purpose of converting into a qualifying policy any policy issued (but not one treated by virtue of section 23 as issued) in respect of an insurance made on or after the 16th day of May, 1973.