Insurance policy is the contract containing insurance contract it is not contract on its own rather it is the documented contract.
Insurance can be said to be a risk bearing institution and they carry out this work through documented contracts that can expire after and agreed period of time. By this period of time of expiration, the contract cannot just end instead there is always an option of policy renewal form by the insured.
This chapter shows the way and manner these policies are renewal with focus on underwriting consideration arising at renewal, General renewal procedure, renewal of policy and position with motor renewal and life Assurance policies.
Underwriting Consideration arising at Renewal
When renewal is invited, there is no law that it must be of the same term as the last one rather many consideration may arise which will mean that the new terms may be either favor the insurer or the insured as the case may be.
Life policy and permanent sickness in personal accident policies are made in such a way that the insurer is not permitted to come off the risk or impose new terms at policy anniversary date no matter what happens. This is as long as the policy holder pays his premium and complies with the policy requirement. The renewal term must be originally arranged, because it is a long term contract and the premium is calculated to take everything into account. New term can only be allow when the policy holder has allowed the policy to lapse due to non-payment of premium a new consideration may be given on request for reinstatement.
General Renewal Procedure
- Before policy expiry date: Some four or six weeks before the normal expiry date of annual policy, the insurer will review the experience of the particular insurance and prepare the necessary renewal papers. The nature and content of these vary between insurers and the classes of business but the general purpose is to advise the policy holder that the cover for the current period is drawing to a close and to indicate the terms on which renewal is to be invites. The renewal premium papers are prepared and issued well in advance to give the insured a reasonable period in which to remit the renewal premium. It also allows time for him to arrange alternative covers if the terms quoted are not satisfactory.
- Days of Grace: the renewal premium should be paid before the expiry date if cover is to be continuous, but with most type of concession known as days of grace is allowed The term relates to a period perhaps fourteen days or one month, after the normal expiry date of the policy during which the renewal premium would be paid and cover kept continuous, for example, the renewal premium for a policy having fourteen days of grace may be paid, say ten days after the expiry date and a loss arising one week earlier than the payment would be recoverable.
Note: Days of grace are not available with some types of policy such as:
- Marine policies
- Motor policies
- Livestock policies
- Short period insurance
Revival of Policies
Practice varies amongst insurers about polices which are revived.
The following solutions have been applied.
- To consider the cover continuous from the normal expiry date, but to obtain an undertaking from the insured that no claim will arise for period between expiry date and the time the premium was paid.
- To allow a full period of twelve months cover from the date the premium is paid and a new renewal date is fixed. Subsequent renewal of the policy will take effect on the new renewal date. Any loss that occurred between the expiry date of the policy and when the premium is eventually paid is not borne by the insurer position with motor renewal and life.
Motor insurance under road traffic act, it is an offence to backdate certificate of insurance. Since the allowance of days of grace is doing this, then it means that motor policies do not have such concession rather the renewal paper may carry a cover note providing Road traffic Act cover only for a period of 15 days from expiry date.
Life Assurance: Life assurance policies usually allow days of grace for the payment of the premium due. If the premium then due remain up paid after the expiry of the days of grace, the policy does not immediately lapse provided that it has been in force, for at least, two years or more under permanent assurance plans such as endowment and whole life assurance. In such circumstances, the “automatic non-forfeiture” provision of the life policy immediately becomes operative.
Note at the time of renewal some underwriting consideration may arise to determine whether any amendment of terms is necessary.
In motor insurance the days of grace is not allow rather a cover note is given to cover the days because of the Road traffic act.