The insurers options in case of the insured danger risk increase and the temporary coverage concept We know that the insured is obliged to notify the insura WhatsApp: +971555570005
The insurers options in case of the insured danger risk increase and the temporary coverage concept
The insurer’s options in case of the insured danger risk increase and the temporary coverage concept.
We know that the insured is obliged to notify the insurance company with the new circumstances that led to increase insured danger when his knowledge , which entails the insurance company to study the case again and take one of three options that we will mentioned in that article later on , Awaiting the insurance company to make her final decision about the insurance contract , The insured risk is covered by with what is called temporary coverage , where the original insurance remains in accordance with the original conditions of the contract, in particular with regard to the annual premium which remains constant during the temporary coverage period . If the risk happened during this period, the insured shall request the compensation from the insurance company, even if the happening of the risk was resulted from changing the circumstances which have been the reason for achieving the risk or increasing its gravity.
As for the options that the insurer is entitled to choice one of them are as follow:
The first option, the request to terminate the contract:
The general rules require that the insured have two options: first, the execution in kind of the original insurance contract, which means returning to the original state at the time of conclusion of the contract, in this case the insured removes any modifications that he added. and led to increase the risk and a conflict between the insured and the insurer , But it seems almost impossible, especially if the these new circumstances are not by the act of the insured, in this case the insurer only has the option to terminate the contract , and this by sending ratified letter accompanied by knowledge of terminating the contract, without the Retroactive effect for the termination , as the insurance contract is a time contact without retroactive effect for the termination , the coverage of the insurer and the insured’s obligation to pay the annual premium ends with the termination of the contract , and contact termination has no specific period , the insurer could request the termination at any time .
If these new circumstance which led to increase the risk happened by the act of the insured, in this case the insurer has the right to refer to the insured for compensation, because in this situation the termination of the contract be a consequence of an act done by the insured and the compensation could be the maintaining the insurer the annual premium that the insured paid for the period after the termination of the contract, and not returning it to the insured.
The second option, maintaining the insurance contract with increasing the insurance premium:
it could be in the insured’s interest to maintain the insurance contract valid, even if the insurer requested an increase in the insurance premium appropriate with the emergency increase in the risk, which is calculated on the basis of the insurance tariff. This increase has a retroactive effect from the time of adding that new circumstances that would increase the risk, And the amendment of the contract happens after increasing the premium by releasing an appendix to the insurance policy.
The third option, maintaining the insurance contract without increasing the insurance premium:
the insured could possibly accept to continue the coverage of the insured without an increase in the insurance premium, as he can sense that it is in his interest to maintain the contract as it is, and that when the new circumstances did not lead to a significant increase in risk. It may also seem that the insurer does a compliment to the insured and desiring to continue dealing with him. and it could also happen that the insured does not request from the beginning the insured any increase in the premium and maintain the contract as it is.
The insurer acceptance to maintain the contract may be expressly acceptance, by writing to the insured that he accepts the maintain of the insurance contract without an increase in the insurance premium despite his knowledge of the new circumstances that have taken place. or it could be a tacit acceptance, and the tacit acceptance is that the insurance company don’t request to terminate the contract and also do not request an increase in insurance premium despite his knowledge of the new circumstances , in this case the silence of the insurance company for a long time ,especially if the insurer continued to receive the insurance premium as it is without any increase , in this case his silence considered a tacit satisfaction to maintain the contract as it is without any increase .
Accordingly, we have reviewed the three options stated by the insurance laws to the insurer to choose one of them, which are the request to terminate the contract, maintaining the insurance contract with increasing the insurance premium, maintaining the insurance contract without increasing the insurance premium. Perhaps the most important point is the concept of temporary coverage, which means the insurer continue to cover the insured with his knowledge of the new circumstances that led to increased risk, so that the insurer takes his final decision and resort to one of the three options.
Attorney / Mohamed Al Marzooqi
Mohamed Al Marzooqi advocates & Consultancy
Lawyer in Abu Dhabi, Dubai – UAE