Section 45 of Insurance Act & How It Protects Policyholders

What is Section 45 of the Insurance Act

Section 45 is like a protection clause for policyholders and nominees. Under section 45 of the Insurance act of 1938, no policy of life insurance shall be called in question after three years from the relevant “policy date.” If you search sec 45 of insurance act or section 45 in insurance online, you’ll see it described as the “three-year rule” because the law clearly sets the time limit.

Under section 45 of the Insurance Act (1938), the period runs from whichever is later among the date of issuance, commencement of risk, revival, or addition of a rider. This detail matters because a revived policy or a rider can restart the contestability timeline.

What insurers can do within the three-year window

Within three years, the insurer can investigate and challenge a policy for specific reasons. Under the Insurance Act’s section 45, an insurer can call a policy in question within the three-year period mainly on grounds such as fraud, or misstatement or suppression of a material fact, depending on the circumstances and the wording of the provision.

Here is the practical takeaway for a life insurance policy in its early years.

If a claim happens early, insurers often scrutinize the proposal form, medical disclosures, lifestyle details, and supporting documents.

If they believe there was fraud or a material non-disclosure, they can repudiate, but they must follow the process and communication requirements in the law.

Section 45: Fraud vs Misstatement

Section 45 treats “fraud” more seriously than a non-fraud misstatement. The law lays out an explanation of what counts as fraud. It clarifies that “mere silence” is not fraud unless the circumstances create a duty to speak, or the silence is equivalent to speaking falsely.

Non-fraud misstatement or suppression has a different outcome. Under section 45 insurance, if repudiation happens due to misstatement or suppression that is not treated as fraud, the provision includes requirements such as the communication of the reasons in writing, and it also provides for premium return in that non-fraud repudiation scenario within the stated timeline in the Act.

Also, the law indicates that a fact is not “material” unless it has a direct bearing on the risk undertaken. The law places an onus on the insurer to show materiality in that context.

What happens after three years?

After three years, the insurer generally cannot call the policy in question on any ground. This is the core protection benefit for consumers under section 45 of the Insurance Act (1938). Once that period ends, the insurer loses the right to reopen the contract for misstatement or suppression disputes in the way Section 45 restricts.

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