In short. This module covers the consequences of non-payment of premium, changes on renewal and the grounds on which an insurance contract ends.
Learning outcomes
After completing this module you will be able to:
- distinguish the consequences of late payment of the first and of subsequent premiums;
- check the content and time limit of a payment notice;
- distinguish the end of the contract from the absence of cover at a particular time.
Key points
The first premium
If the policyholder has not paid the premium or the first premium within 14 days after conclusion of the contract, the insurer may withdraw from the contract until payment; it is presumed to have withdrawn if it does not sue for the premium within three months (VÕS § 457(1)). If the first premium that has become due is unpaid when the insured event occurs, the insurer is released from its obligation to perform (§ 457(2)). The insurer cannot rely on the consequences in § 457(1) and (2) unless it informed the policyholder of them before the contract was concluded (§ 457(3)).
Subsequent premiums
If a second or subsequent premium is late, the insurer may set, in a form that can be reproduced in writing, an additional period of at least two weeks, or at least one month for insurance of a building; the notice must state the legal consequences of expiry (VÕS § 458(1)). The insurer is released if the insured event occurs after that period has expired and the premium is unpaid for a reason attributable to the policyholder (§ 458(2)). An ordinary reminder invoice is not in itself such a notice.
Cancellation and reinstatement
After the period expires the insurer may cancel the contract without notice, or may state in the notice itself that the contract will be deemed cancelled on expiry (VÕS § 458(3)). If the policyholder pays within one month of cancellation or of expiry of the period and no insured event occurred before payment, the contract is not deemed cancelled (§ 458(4)). An agreement deviating from these provisions to the policyholder's detriment is void (§ 427(1)).
Changes and termination
On renewal or amendment, check whether new terms (e.g. a higher deductible) were agreed and properly notified to the policyholder; premium changes are governed by VÕS §§ 460–462. The ground and date of termination (§§ 466–474) must be distinguished from the date of the insured event.
Read before the quiz
Articles on this site:
- Insurance premium under Estonian law: first and later premiums
- Ending an insurance contract in Estonia: nullity to cancellation
Legal sources:
Practical case
Write down your own answer before opening the suggested approach.
The policyholder did not pay the second instalment of a building insurance premium on time. The insurer sent a new invoice by e-mail without explaining the legal consequences. A week later there was a fire. The insurer declines the claim because of the unpaid premium. Prepare a checklist.
Suggested approach
Check: the policy and payment schedule (was it a subsequent, not the first, premium); the full text of the notice (for a building, was a period of at least one month set and were the consequences stated, VÕS § 458(1)); receipt of the notice; the running of the period and the date of the fire; the reason for non-payment (§ 458(2)). A new invoice that neither explains the consequences nor sets a period of at least one month does not meet § 458(1), so the insurer cannot rely on it to be released. An agreement to the contrary would be void as against the policyholder (§ 427(1)).
Self-check quiz
Answer the three questions and press "Check answers". An explanation is shown for each question.