40.
| (1) Where, in terms of a policy of long term insurance business, the policy is to mature upon survival to a fixed date or on the death of such person, and the policy is subject to payment of premia at an uniform sale for a fixed term or where the death occurs before the expiry of such fixed term, until the date of such death, and all premia have been paid for three consecutive years, the policy shall he 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 non-payment, be kept in force 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 long term insurance business issued by the insurer and. under subsection (1). the policy is kept alive to the extern 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 : | | |
| | (b) the paid-up value of the policy is less than such amount as is determined by the Board from time to | | |
| | (c) after default has occurred in the payment of the premium, the parties 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 prernia. | | |
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Sri Lanka Consolidated Acts