The grace period, also known as the insurance grace period or grace month, is a concept that can lead to misunderstandings and problems regarding the obligations of the insurer and the insured. We see it in detail in this article.
What the law says
If, due to the policyholder’s fault, the first premium has not been paid, or the single premium has not been paid when it is due, the insurer has the right to terminate the contract or demand payment of the premium due through enforcement based on the policy. Unless otherwise agreed, if the premium has not been paid before the loss occurs, the insurer will be released from its obligation.
In case of non-payment of one of the following premiums, the insurer’s coverage is suspended one month after the due date. If the insurer does not claim payment within six months after the expiration of the premium, it will be understood that the contract is terminated. In any case, the insurer, when the contract is suspended, may only demand payment of the premium for the current period.
If the contract has not been resolved or terminated in accordance with the preceding paragraphs, the coverage takes effect again twenty-four hours after the day on which the policyholder paid his premium.
In short, the insurance coverage will be suspended one month after the expiration date. This implies that the insurer is obliged to maintain the coverage until one month after the expiration of the policy. But this only applies if the insurance is renewed. Because, as we will see below, the month of grace means there is a month of free insurance. Keep reading.
The grace period is not a month of free insurance
But this does not mean that the insurer has the obligation to give away a month of insurance. The purpose of this month of grace is to give the insured the possibility of correcting any problem in the payment of the renewal of the insurance that may have occurred. In fact, the annuity of the insurance does not start to count the day the policy is paid, but the day that the renewal of the same corresponded.
If after that month the insured does not pay the policy, the coverage is suspended. This does not mean that the insured is “free” of the insurance . In fact, the contract does not expire until six months after the non-payment of the premium has occurred. If it is paid before that term, the coverage takes effect again twenty-four hours later. In any case, the insurer, when the contract is suspended, may only demand payment of the premium for the current period.
Mandatory coverage until there is proof of the termination of the contract
In any case, as long as the insurer does not prove that the contract has been terminated, the insured continues to have the mandatory civil liability coverage. The Judgment of the 1st Chamber of the Supreme Court of September 10, 2015, Rec. 544/2013 , establishes as doctrine of the Chamber for the purposes provided in article 15.1 of the Insurance Contract Law, in case of non-payment of the first premium or single premium, in a compulsory insurance policy for civil liability in the circulation of motor vehicles, Armenian insurance settlement the following:
In order for the insurance company to be released from the obligation to indemnify the injured party in the compulsory insurance contract for civil liability in the circulation of motor vehicles due to non-payment of the first premium or single premium due to the policyholder’s fault, it is necessary that it proves to have directed to the policyholder a certified mail with acknowledgment of receipt or by any other means allowed by law that allows proof of receipt, by which the termination of the contract is notified.
Better make things clear
The insurer can request the payment of the premium by executive means. The fact of not paying the policy does not exempt the insured from paying it. In fact, although most insurers terminate contracts when the policy is not paid, they are actually within their right to claim it through executive action.
Remember what the Law says: if, due to the policyholder’s fault, the first premium has not been paid, or the single premium has not been paid when due, the insurer has the right to terminate the contract or demand payment of the premium due executive based on the policy. Unless otherwise agreed, if the premium has not been paid before the loss occurs, the insurer will be released from its obligation.
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