Facts About Insurance Premiums
An insurance premium and the application form are the considerations that put an insurance coverage in force. Thus the conditions stipulated in the insurance contract become binding upon payment of the initial premium and delivery of the policy had been done. Successive payments are called renewal premiums and are necessary for the continued coverage under an insurance contract. However, a renewal premium is not a debt that the insured owes to the insurer, and which the insurance company can sue a policyholder. Failure on the part of the insured to pay his premium dues will simply cause the insurance policy to lapse.
An insurance premium can be paid after the due date but before the grace period expires to prevent the policy from lapsing. The insurance company has the right to be paid in cash but it can also accept payments by checks, promissory notes and other forms of payments. Payment by personal check is conditional on the check being honored. A promissory note already constitutes premium payment regardless of whether or not the individual actually pays the promissory note except, when it specifically express that the note must be paid when due. Succeeding payment can also be paid through automatic premium loans or through accumulated policyholder dividends.
Persons other than the insured can make succeeding premium payments which the insurer's office or its authorized agent can receive. A collateral assignee can also make payments although he has no obligation to do so. And if the assignee pays, he can recover his payment. An agent without express authority from his company to collect premium payments will bind the insurer if he fails to remit it, if he has an apparent authority to collect premiums. On the other hand, an insurer does not have the obligation to send premium notices unless there is a policy condition that it does so. However, once it starts sending notices, it cannot stop it without prior warning to the insured. More so, it cannot lapse a policy of the insured that are relying on the premium notices to pay their premium dues.
Excuses for nonpayment of premiums are usually due to the insurance company's waiver of payment or of the timely payment of dues, refusal of tender, incorrect policy cancellation, or premium collection failure. If payment through mail was allowed by the insurer and the payment was delayed or was lost on the mail, the insurer cannot lapse the policy on the condition that it was sent with sufficient time to reach the insurer. However, in assuming such risks, the insurance company will no longer have the obligation to return premiums. An exception to this rule happens when; a minor policy owner disavows a policy, premiums were paid in advance or under a mistake. Also, when there is a policy contract stipulating that premiums be returned under certain circumstances, such as the return of the policy during the free look period or when the insured commits suicide under the suicide exclusion period.
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