Section 542 | Replacement of qualifying policies

(1)A qualifying policy (“the replaced policy”) and a policy of life insurance (“the replacement policy”) which replaces the replaced policy are treated as a single policy for the purposes of sections 484 to 497 if conditions A to D are met.

(2)Condition A is that the replacement policy is also a qualifying policy under the rules in paragraph 17 of Schedule 15 to ICTA.

(3)Condition B is that the replacement results from a change in the life or lives insured.

(4)Condition C is that any sum becoming payable by the insurance company on or in connection with the termination of the replaced policy is retained by it and applied in the discharge of some or all of the liability for any premium becoming due under the replacement policy.

(5)Condition D is that no consideration in money or money's worth (other than the benefits for which provision is made by the replacement policy) is receivable by any person on or in connection with—

(a)the termination of the replaced policy, or

(b)the coming into existence of the replacement policy.

(6)The single policy is treated for the purposes of sections 484 to 497 as issued in respect of an insurance made at the time of the making of the insurance in respect of which the replaced policy was issued.

(7)So long as the replacement policy continues to be a qualifying policy, the single policy is also treated as a qualifying policy for those purposes.

(8)This section applies equally to a second or subsequent replacement policy.

(9)References in Schedule 2 (transitionals and savings) to—

(a)a policy of life insurance,

(b)the time of the making of the insurance in respect of which a policy of life insurance is issued, and

(c)a qualifying policy,

are to be read in accordance with this section.