No Premium No Cover Principle

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No Premium No Cover Principle This principle is regulated in most insurance legislatures and provides that, the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk unless premium is paid in advance. Generally, you will be provided a grace period which is typically up to 30 days after your due date. If you fail to pay your premium in the grace period as well, then your insurance policy will get terminated. The payment of premium with post-dated cheques runs foul as payment of premium. Unless and until a cheque is honoured, it cannot be said to be the same thing as money. Therefore no valid contract of insurance to ground the Insurer and insured. For a contract to be valid under the law, it must be backed by consideration. Consideration is the inducement to a contract; the reason or material cause for a contract; some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other. Where no consideration is given, then the contract lacks legal efficacy. Contrarily an insurance premium collected by an insurance broker in respect of an insurance business transacted through the insurance broker shall be deemed to be premium paid to the insurer involved in the transaction. This is because once the insured pays his premium to the broker he has met his obligation to the insurer and the insurer cannot resile from the contract whether or not the broker remits the sum paid to the insurer. It is therefore not the business of the insured whether or not the broker remitted the premium paid to the insurer. In an insurance contract, the consideration expected from the insured is the payment of the premium. where the premium is not paid there is no cover for the event insured. Therefore, it is imperative for individuals and businesses who have negotiated insurance contracts to know that the full premium must be prepaid and in advance before the contract could be valid and enforceable. Once such premium is not paid in advance, the contract becomes void and unenforceable. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful

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