Life insurance and advances: when the insurer does not respect its obligation to inform and advise


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Mr. K takes out a life insurance contract and asks for several advances. Not obtaining the reimbursement of the sums in due time, the insurer proceeds to the total surrender of the contract. The insured takes his case to court.

In 1996, Mr. K took out a life insurance contract through a broker. Until 2007, he requested and obtained several advances.

In March 2011, the insurer informed him by letter that in the absence of a response to his request for reimbursement of the sums due in respect of the advances and accrued interest thereon, he proceeded to the total repurchase of his contract. Not obtaining payment of the sum claimed (125,380 euros) from Mr. K, the insurer assigns him for payment. The latter was condemned on appeal to pay the insurer the sum of 125,380 euros.

How the advance on a life insurance policy works

The advance on a life insurance contract works on the same principle as the loan. It allows the insured to be lent by the insurer part of the capital placed on the contract, in return for interest. Thus, the insured can face a one-time need for cash, without having to make a surrender (total or partial) on his contract. The advance does not modify the operation of the contract and has no financial or tax impact on the contract. The amount advanced is generally limited to 80% of the capital invested in funds in euros and 60% of the capital invested in units of account. The insured can repay in one or more instalments, within 3 years, sometimes renewable.

The judgment of the Court of Appeal

To convict Mr K, the Court of Appeal holds that the system of the advance is defined by a general regulation of which Mr K claims to have been addressed by letter of May 18, 2006, the provisions of which are applicable to advances granted during the year 2006 and which stipulates that if the amount of the advance to be reimbursed becomes equal to or greater than 100% of the surrender value of the contract, it will be bought back in favor of the insurer in order to reimburse the amount of the advance. The judgment adds that for lack of previous documents, this regulation has been the law of the parties since May 18, 2006 and was therefore applicable when the insurer proceeded with the criticized redemption.

Mr K then appealed in cassation.

The insurer has not complied with its obligation to inform and advise

The Court of Cassation relies on article 1134 of the civil code according to which legally formed agreements take the place of law for those who made them. It thus considered that the insurer had unilaterally modified the life insurance contract by providing for its benefit a total surrender option in the event of the surrender value of the contract being exceeded by the total amount of the advances granted. It thus rejects the insurer’s request for reimbursement because of the breach of its obligation to inform and advise.

Source: judgment of the Court of Cassation, second civil chamber, of July 7, 2022

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