Vietnam: 30 frequently questions and answers about life insurance

Life insurance

1. What is life insurance?

Life insurance refers to a type of insurance designed to insure the life or death of the insured person.

It is necessary to distinguish life insurance and health insurance. These are two different types of insurance which have different insured subjects. Health insurance refers to a type of insurance designed to provide the insured with insurance benefits when the insured suffers an injury, illness or disease, or needs medical care.

2. What is a life insurance contract? What is the subject of a life insurance contract?

A life insurance contract refers to an agreement between the insurance buyer and the life insurance enterprise, or the mutual organizations which provide a microinsurance product (the “Insurance Enterprise”) stating that the insurance buyer shall pay the insurance premium and the Insurance Enterprise shall compensate and pay the insurance amount when the insured is alive or dead at a certain time/ period of time as agreed upon.

The insured subject of a life insurance contract is human life and life expectancy.

3. Under what circumstances does the insurance buyer have insurable benefits from the life insurance contract?

At the time of entering the insurance contract, the insurance buyer has the insurable benefits, otherwise, it shall be invalid.

For life insurance, the insurance buyer shall have insurable interests for the following persons:

  1. The insurance buyer himself/ herself;
  2. The insurance buyer’s spouses, parents, children;
  3. The insurance buyer’s biological siblings or other persons who are in a nurturing or alimony relationships with the insurance buyer; and
  4. Persons having financial interests or labor relations with the insurance buyer.
4. Is it possible to buy life insurance for the death of another person?

Yes, it is. The insurance buyer can enter into a life insurance contract to insure the death of another person if they have obtained written consent clearly stating the insurance amount and the beneficiary of this person.

5. Under which cases can a life insurance contract not be entered into?

The laws do not allow entry of a life insurance contract for the death of the following persons:

  1. Minors, except as agreed to in writing by their parents or guardians;
  2. People incapable of civil acts;
  3. Persons who have difficulties in awareness and control of acts; and
  4. People with restricted capabilities of civil acts.
6. What is an insured event for life insurance?

An insured event refers to an unexpected event agreed upon between contracting parties or prescribed by laws in which, when occurring, the Insurance Enterprise is bound to pay compensation or insurance cover according to their agreements in the contract.

The insured event of life insurance is the death or life of a person.

  1. Life insurance for a life event refers to an insurance operation for an event in which the insured lives up to a certain term. Specifically, the Insurance Enterprise must pay the insurance amount to the beneficiaries if the insured lives up to the term stated in the insurance contract.
  2. Life insurance for death refers to an insurance operation for an event in which the insured passes away within a certain period. Specifically, the Insurance Enterprise must pay the insurance amount to the beneficiaries if the insured dies within the period stated in the insurance contract.
7. Does the life insurance contract need to be in writing?

Yes. By law, insurance contracts in general and life insurance contracts in particular must be made in writing.

8. What content does the life insurance contract include?

An insurance contract must include the following main contents:

  1. Information about the insurance buyer, the insured, the beneficiary (if any), the Insurance Enterprise;
  2. Insured subject;
  3. Sum insured;
  4. Scope of insurance coverage or insurance benefits, insurance rules, terms, and conditions;
  5. Rights and obligations of the Insurance Enterprise and the insurance buyer;
  6. Insurance term, effective date of the insurance contract;
  7. Insurance premium, method of fee payment;
  8. Method of insurance compensation and payment; and
  9. Dispute resolution method.
9. What action is taken if a life insurance contract has unclear terms that could lead to different interpretations?

If an insurance contract has vague terms and conditions that could be misinterpreted, they shall be explained in favor of the insurance buyer.

10. What is the time period to consider joining life insurance? Why should insurance buyers be concerned about this issue?

By law, the time to consider joining life insurance is only regulated for an insurance contract with the term of more than 01 year. Accordingly, the time to consider joining life insurance is 21 days from the date of receiving the insurance contract. However, of note, the starting time of 21-day consideration period will vary and is subject to each Insurance Enterprise. It can be counted from the signing date of the contract or from the date of officially receiving contract.

The 21 days to consider participating in insurance is one of the most important rights for the insurance buyer. During this period, the insurance buyer is able to:

  1. Change or supplement the benefits in the insurance contract;
  2. Increase or decrease the value of the insurance contract;
  3. Refuse to continue participating in the insurance but still receive a refund of paid insurance premium after deducting reasonable expenses (if any) as agreed in the insurance contract.

Within this 21-day consideration period, the insurance buyer should take the time to thoroughly review and re-check the information and terms of the insurance contract and consider whether to continue participating in the insurance.

11. What is the process required for participating in life insurance?

In general, the order of entering an insurance contract is conducted as follows:

  1. Firstly, the insurance buyer directly requests the Insurance Enterprise to issue an insurance letter/ certificate of insurance. For some types of insurance, the insurance buyer shall fill out the request form prepared by the Insurance Enterprise. The insurance claim form must include the main content such as the name of the buyer, the insured, the insured subject, the sum insured, the insurance period, and other content as requested by the buyer.
  2. Then, when receiving the insurance claim dossier, the Insurance Enterprise will check the documents and assess the risks. If accepting the insurance, the Insurance Enterprise issues an insurance letter/ certificate of insurance to the buyer.
12. What is temporary insurance in life insurance? How does the insurance buyer benefit from temporary insurance?

Temporary insurance in life insurance means an insurance program that takes effect from the time the Insurance Enterprise receives the insurance request and the temporarily calculated insurance premium of the buyer until the Insurance Enterprise officially accepts or refuses the insurance, unless otherwise agreed.

In practice, subject to each Insurance Enterprise, the time of termination of the temporary insurance may differ.

Even though the insurance contract has not been signed, if the insured event occurs within the term of temporary insurance such as the death of the insured, the Insurance Enterprise will still cover the insurance according to the terms on the insurance term, the sum insured, and temporary insurance conditions as agreed.

13. Is it required for the insurance buyer to make a lump sum payment for the life insurance premium?

No, it is not. Insurance premium refers to the amount that the insurance buyer is bound to pay to the Insurance Enterprise as prescribed by law or agreed to in the insurance contract.

The insurance buyer can make a lump sum payment or installment payment according to the terms and methods as agreed to in the insurance contract.

14. How are cases handled in which the insurance buyer can no longer afford to pay the insurance premium?

By law, if the insurance premium shall be paid in installments and the insurance buyer has paid for one or several insurance periods but is unable to continue paying the fees, the following regulations will be applied:

  1. The insurance buyer is allowed to extend the payment term by 60 days.
  2. After the above 60-day extension period, the insurance buyer and the Insurance Enterprise may:
    • Agree to extend the payment term; or
    • Unilaterally terminate the insurance contract.

In this case, the insurance buyer is not required to pay all of the insurance premium until the time of unilateral termination of the insurance contract.

The Insurance Enterprise shall be responsible for paying the insurance amount to the insured if the insured event occurs before the time of unilateral termination of the insurance contract and may deduct the debts of the insurance premium.

Moreover, the parties can agree to restore the validity of the insurance contract within 02 years from the date of termination and the insurance buyer has paid the debts of the insurance premium.

15. Can the Insurance Enterprise initiate a lawsuit to request the insurance buyer to pay the insurance premium?

No, it cannot. In case the insurance buyer did not pay or failed to pay in full the insurance premium, the Insurance Enterprise shall not be allowed to arbitrarily deduct the insurance premium from the surrender value of the insurance contract without the insurance buyer’s consent and not be allowed to initiate a lawsuit to request the insurance buyer to pay the insurance premium. Of note, this regulation shall not be applied to the group insurance.

16. If the insured dies due to another person’s acts, is the Insurance Enterprise required to carry out the obligation of compensation and insurance payment?

Yes, it is. If the insured is deceased due to direct or indirect acts conducted by a third party, the Insurance Enterprise shall still discharge their obligation to pay insurance indemnity or coverage to beneficiaries as agreed upon in the insurance contract unless the insured’s death was caused willfully and intentionally by the insurance buyer or beneficiaries.

17. Does the right to claim a refund of compensation against a third party that caused the insured event (principle of subrogation) apply to life insurance? Why?

No, it does not. The right to claim a third-party’s indemnification refers to the right of the Insurance Enterprise to request the third-party causing damage to reimburse the amount paid by the Insurance Enterprise for the occurred insured event.

The right to claim a third-party’s reimbursement does not apply to life insurance. Specifically, if the insured person dies due to direct or indirect acts of a third party, the Insurance Enterprise is still responsible to indemnify and pay the insurance amount as agreed upon in the insurance contract without having the right to claim a third-party to refund the amount paid by the Insurance Enterprise to the beneficiaries. The third party is still responsible for indemnifying the insured in accordance with the law.

18. Under which circumstances does the Insurance Enterprise not carry out the obligation of indemnification and insurance coverage?

The Insurance Enterprise is not required to compensate or pay an insurance amount as agreed to in the contract in the following cases:

  1. The insured died by suicide within 02 years from the date of paying the first insurance premium or restoring the insurance contract’s validity;
  2. The insured’s death was caused willfully and intentionally by the insurance buyer or the beneficiary. If there is more than 01 beneficiary, and one or several persons intentionally caused the insured’s death, the Insurance Enterprise still must indemnify and pay insurance amount to other beneficiaries;
  3. The insured died as a result of the death judgment enforcement;
  4. Other cases stated in the insurance contract.
19. Can the parties in a life insurance contract agree on cases of non-compensation and insurance payment?

Yes, they can. The parties of the life insurance contract may negotiate on other cases in which the Insurance Enterprise shall not compensate or pay an insurance amount, generally known as the clause of insurance liability exclusion.

When negotiating the clause of insurance liability exclusion, the following issues should be noted:

  1. The cases of insurance liability exclusion must be clearly stated in the insurance contract;
  2. The Insurance Enterprise must clearly and fully explain and have evidence to confirm that the insurance buyer has been fully explained by the Insurance Enterprise and clearly understood such clause when entering the contract.
20. How is the beneficiary of a life insurance contract determined? How many beneficiaries can there be for a life insurance contract?

Beneficiary means an organization or individual appointed by the insurance buyer or the insured to receive the insurance amount according to the insurance contract.

In a life insurance contract, the information about a beneficiary is required. There are some notes when appointing the beneficiaries as follows:

  1. If the insurance buyer is not concurrently the insured, the insurance buyer must obtain the written consent of the insured when appointing a beneficiary;
  2. If the insured is a minor; or has lost his/ her civil act capacity; or has difficulties in cognition and behavior control; or has limited civil act capacity, the appointment of a beneficiary must be approved by his/her legal representative.

A life insurance contract may have one or more beneficiaries. If there is more than one beneficiary, the order or proportion of each beneficiary is permitted. If the order or percentage of beneficiaries is not determined, all beneficiaries will benefit in the same proportion.

21. Can the insurance buyer change the beneficiary of a life insurance contract?

Yes, they can. The insurance buyer can change the beneficiary if having the written consent of the insured and then must notify the change to the Insurance Enterprise in writing.

The Insurance Enterprise must confirm the change in the insurance contract, or another document attached to the insurance contract after receiving the notice of change from the insurance buyer.

22. What is the time limit required for the insured or the beneficiary to submit a request of compensation and insurance payment?

The time limit for submitting a claim of compensation and insurance payment according to the insurance contract is 01 year from the occurrence date of the insured event.

If a force majeure event or objective obstacle occurred, the occurrence time of the force majeure event or objective obstacle shall not be included in such period of 01 year.

If the insured or the beneficiary can prove that he/she did not know the occurrence time of the insured event, the above 01-year period shall be counted from the date that the insured or the beneficiary knows about the occurrence of the insured event.

23. What is the time limit for the Insurance Enterprise to compensate and pay the insurance amount if a life insurance event occurs?

If a life insurance event occurs, the Insurance Enterprise must compensate, and pay the insurance amount within the time limit agreed to in the insurance contract. If there is no agreement on the time limit, the Insurance Enterprise shall compensate and pay insurance amount within 15 days from the receipt date of a complete and valid dossier requesting the compensation and insurance payment.

If the Insurance Enterprise is late in compensation and paying insurance, it must pay the interest on the late payment amount for the late payment period. The interest rate for the late payment amount is agreed to by the parties in accordance with the Civil Code of Vietnam.

24. How is the cancellation of life insurance contract defined? When can the insurance buyer cancel a life insurance contract?

Cancellation of life insurance contract is the termination of insurance contract from the time of signing. Therefore, the insurance contract will not take effect from the time of signing.

The insurance buyer can cancel the insurance contract in the two following cases:

  1. The Insurance Enterprise intentionally fails to fulfill the obligation to provide information or provides untruthful information in order to enter into an insurance contract. In this case, the insurance buyer will be refunded the paid insurance premium and the Insurance Enterprise must compensate the incurred damage to the insurance buyer (if any).
  2. The insurance buyer refuses to participate in insurance within 21 days of considering to participate in insurance applied to insurance contract with a term of more than 01 year. In this case, the insurance buyer will be refunded the paid insurance premium after deducting reasonable expenses (if any) as agreed to in the insurance contract; The Insurance Enterprise is not required to compensate or pay an insurance amount if the insured event occurs.
25. What is refund value? Is refund value applied to life insurance? In which cases can the insurance buyer receive the refund value?

Refund value is the amount the insurance buyer receives when the insurance contract is terminated before the term or before the occurrence of the insured event.

It should be noted that the refund value only applies to life insurance, and not to all life insurance products.

The insurance buyer can receive the refund value of the refundable life insurance contract in the following cases:

  1. The Insurance Enterprise or the insurance buyer unilaterally terminated the insurance contract due to reasons that the insurance buyer failed to pay the insurance premium or failed to pay the insurance premium in full within the agreed time limit or after the payment extension period; or the Insurance Enterprise or insurance buyer did not accept the request for changing the level of insured risks as prescribed by the laws.
  2. The insurance buyer unilaterally terminated the insurance contract because they did not agree with the transfer of the insurance contract list conducted by the Insurance Enterprise.
26. In which cases can the life insurance buyer unilaterally terminate a life insurance contract?
  1. There is a change in the factors used to calculate the insurance premium, which leads to a decrease in insured risks, and the insurance buyer requests the Insurance Enterprise to carry out one of the following: reducing the insurance premium to apply to the remaining period of the insurance contract; increasing the insurance amount to apply to the remaining period of the insurance contract; lengthening the insurance term; or widening the insurance scope for the remaining period of the contract. If the Insurance Enterprise does not accept, the buyer can unilaterally terminate the contract.
  2. The insurance buyer fails to pay the insurance premium or fails to pay the insurance premium in full within the agreed time limit or after the payment extension period.
  3. The insurance buyer does not agree with the transfer of the insurance contract list conducted by the Insurance Enterprise.
27. In which cases can the Insurance Enterprise unilaterally terminate a life insurance contract?
  1. There was a change in the factors used to calculate the insurance premium, which led to an increase in insured risks, and the Insurance Enterprise carried out one of the following but the insurance buyer did not accept: recalculating the insurance premium to apply to the remaining period of the insurance contract; reducing the insurance amount to apply to the remaining period of the insurance contract; shortening the insurance term; or reducing the insurance scope for the remaining period of the contract.
  2. The insurance buyer failed to pay the insurance premium or failed to pay the insurance premium in full within the agreed time limit or after the payment extension period.
28. What is a group insurance contract? What should be noted on group life insurance?

A group insurance contract refers to agreements between the insurance buyer and Insurance Enterprise to cover a group of people in the same insurance contract.

The below are the notable points regarding a group life insurance contract:

  • A group participating in an insurance contract must be a group that was previously formed not for the purpose of participating in insurance. The group referred hereby is not a group of friends, acquaintances or random people formed to participate in insurance but a group of members, employees of an organization, enterprise, etc.;
  • The insurance buyer and the insured may agree to jointly pay the insurance premium;
  • In a group insurance contract, the insurance buyer shall not appoint a beneficiary in the case of the death of the insured, but the insured will appoint the beneficiary; and
  • In addition to the content of the insurance contract in general, the group insurance contract must have the following content:
    • Conditions for the insured to participate in insurance; and
    • Conditions and procedures for converting the group insurance contract into an individual insurance contract.
29. What is an insurance contract transfer? Is it possible to transfer a life insurance contract?

Transfer of insurance contract generally refers to the transfer of the insurance buyer’s capacity to another party so that such party can replace the legal position and inherit the rights and obligations of the insurance buyer in the insurance contract. The transferee will continue to maintain and benefit from the contract.

The insurance buyer may transfer the insurance contract if the following conditions are satisfied:

  1. Having the written consent of the insured or the insured’s legal representative; and
  2. The transferee of the insurance contract must have the insurable interests, and have the right to inherit the insurance buyer’s rights and obligations.

The insurance contract transfer is only effective when the insurance buyer notes in writing and the Insurance Enterprise agrees in writing, unless otherwise provided by international custom or otherwise agreed upon.

30. What should be noted to mitigate the risk of invalidity of a life insurance contract?

A life insurance contract may be invalid in the following circumstances:

  1. The insurance buyer does not have insurable interests as mentioned in Question No. 3 at the time of signing the contract;
  2. The insured subject (i.e., someone’s human life/life expectancy) does not exist at the time of signing the contract;
  3. The insurance buyer knows that the insurance event occurred at the time of signing the contract;
  4. The contract’s purpose and content violate the prohibition of laws and are contrary to social ethics;
  5. The Insurance Enterprise and the insurance buyer enter into fake insurance contract;
  6. The insurance buyer is a minor; a person who has lost his/her civil act capacity; a person who has difficulty in perceiving and controlling his/her acts; a person who has a limited civil act capacity;
  7. The contract is entered into due to a mistake that causes one or the parties to fail to achieve the contract’s purpose, unless otherwise provided by the law;
  8. The contract is entered due to fraud, unless otherwise provided by the law;
  9. The contract is entered into due to intimidation or coercion;
  10. The insurance buyer is not aware of its behavior when entering into the contract; and
  11. The contract is not made in writing.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 11 April 2023

Writers: Trinh Nguyen & Quang Nguyen

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