25.
| (1) Where, in terms of a policy of life assurance, the policy is to mature upon death or upon survival to a fixed date or on earlier death, and the policy is subject to payment of premiums at an uniform rate for a fixed term or until earlier death, and all premiums have been paid for three consecutive years, the policy shall be deemed to acquire a surrender value, and, notwithstanding any contract to the contrary, shall not lapse by reason of non-payment of further premium but shall, notwithstanding such nonpayment, be kept alive to the extent of its paid-up value. |
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| (2) Where a debt owing to an insurer is secured by a policy of life assurance issued by the insurer and, under subsection (1), the policy is kept alive to the extent of its paid-up value, the insurer-
| | (a) may treat the debt as a debt secured by the policy so kept alive, and thereupon the policy so kept alive shall be a security for the debt, or | | |
| | (b) may reduce the amount of such paid-up value by an amount the present value of which is equal to the amount of the debt, and thereupon the debt shall cease to be owing to the insurer. | | |
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| (3) This section shall not apply in any case where-
| | (a) the sum assured is payable only on the happening of a contingency which may not arise; or | | |
| | (b) the paid-up value of the policy will be less than one hundred rupees; or | | |
| | (c) the parties after default has occurred in the payment of the premium agree in writing to some other arrangement; or | | |
| | (d) the surrender value of the policy is automatically applied under the terms of the contract for maintaining the policy in force notwithstanding the non-payment of premiums. | | |
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Sri Lanka Consolidated Acts