Right to Rescind a Contract of Insurance

Section 48.  Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract.

After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent.

When must the insurer exercise his right to rescind?

In a non-life insurance policy, the insurer may rescind a contract of insurance prior to the commencement of an action on the contract.

In a life insurance policy, the insurer may rescind the contract of insurance during the first two years when the policy was in force during the lifetime of the insured from the date of its issue or of its last reinstatement.

What are the requisites in order that the insurer may rescind a life insurance policy?

1)       There must be a basis for the rescission (breach of warranty, concealment, misrepresentation, etc.)

2)       The rescission must be coupled with a check for the amount of premiums already paid. (without this, the rescission is not effective)

3)       The rescission must be exercised within the two years that the insurance is in force during the lifetime of the insured.