Should an insurer refund the unused portion of my insurance if my vehicle is written off and I am paid out in full?
The above question was asked of me by an insured who had only renewed their motor vehicle insurance policy 2 weeks before their car was severely damaged while parked. The insurer agreed to write off the vehicle and offered a payment that the Insured feels is fair and reasonable.
It was annoying to the insured that they had only paid their insurance 2 weeks before and was hoping to get the bulk of it back.
The short answer to the question is that no, the insurer does not refund the premium.
In simplest terms, insurance is a contact and the terms of which state in terms like: In consideration of you paying the premium, we will indemnify you for losses to your motor vehicle.
With the payment of the agreed market value of the vehicle the insurer has fulfilled their part of the contract and in turn are entitled to receive the annual premium which they charged to provide that level of protection.
If it had been a month-by-month payment type arrangement, the insurer would have deducted the balance of the unpaid premium from the settlement.
It is great that the Insured had the protection of their insurance policy as the claim was settled expeditiously and fairly and this allows the Insured to move forward after the unfortunate event. It saves them from having to seek a recovery from the third party who may or may not have their own insurance.
Murphy’s Law is alive and well and it is just a shame for the Insured in this case that the collision did not occur 2 or 3 weeks earlier but none of us know when “It” is going to happen.
In addition to the unused portion of the premium, the unused portion of the registration is deducted from the settlement figure. This might cause an upset in the event where the insured buys back the vehicle, to make good and continue driving it. As the insurer will request de-registration, the insured has to get a roadworthy certificate to re-register the vehicle and then get re-insured, at the current market rate. After the unused portion of the registration is deducted, the cost of getting a roadworthy certificate, re-registration and indexed/increased premium costs is NOT added to the settlement figure. Regards. Mark O’Driscoll
Agreed, but still a tough one to explain to the average consumer. I’m of the view that if the insured is not at fault, the insurer should at least allow them to arrange a ‘change of vehicle’ to their policy and pay any applicable additional premium, rather than cancel the old policy and start up a new one at great expense.
Agreed as the premium charge represents the sum insured. Payment is made on the sum insured or the market value whichever is lesser. Policy holders may win if the market value is greater than the sum insured—the policy holder gets to keep the salvage based on the fact that it has not being fully paid off.
The insurance contract says its an annual contract for the period of 12 months for which the premium is to be paid in full. It is only the mode of payment which has made it an instalment payment of 12 months. Whether a claim is made or not, the full payment has to be paid to the insurer.