An Insurance Question.

[Cr1MiNaL]

I was just wondering if any other people had come across this:

Facts:

1. You choose to pay monthly insurance of say 80 / month (for example).
2. You pay the amount every month for say 5 months.
3. You then have a reason to claim on your insurance. The company advises that they will write the bike off and pay out the sum insured. You accept. They pay out the sum insured minus the excess. Clear till here. Then they proceed to deduct the unpaid balance of the premiums for the months remaining in the year (that hasn't come yet too).

My question is: Is this appropriate? should they be charging and deducting premiums that haven't been paid yet for the remainder of the year?

The insurance company is Swan and I am told their policy wording does not state this.

Please help.

Thanks in advance.

[bane]

yep, standard practice (in my experience).


If you pay your policy in full at the start, you dont get a refund should the insured vehicle get written off during the insurance term.

Effectively you have a hire purchase agreement - you are paying off the 12month insurance cover in monthly installments, i.e. rather than getting 12 one month insurance covers.

[Swoop]

Yep. Looks simple enough to me.
You have to pay whatever amount for the whole year, but you have only paid X/12'ths of this.

[Grahameeboy]

I was just wondering if any other people had come across this:

Facts:

1. You choose to pay monthly insurance of say 80 / month (for example).
2. You pay the amount every month for say 5 months.
3. You then have a reason to claim on your insurance. The company advises that they will write the bike off and pay out the sum insured. You accept. They pay out the sum insured minus the excess. Clear till here. Then they proceed to deduct the unpaid balance of the premiums for the months remaining in the year (that hasn't come yet too).

My question is: Is this appropriate? should they be charging and deducting premiums that haven't been paid yet for the remainder of the year?

The insurance company is Swan and I am told their policy wording does not state this.

Please help.

Thanks in advance.

No, they cannot deduct unpaid premium.

Due to case Law you can cancel the instalments from the date the bike was deemed a total loss.

If you have paid the premium in full you do not get a refund.

So better paying premium by instalments.

[cowboyz]

I say not fair. If a company is willing to take it on as a monthly premium then that is what it should be. I have never cancelled an insurance policy that has been paid monthly but are you saying if you sign up for insurance and 6 months down the track you sell the bike you can not cancel the insurance on it for another 6 months? Seems crazy. Are people paying insurance on stuff they no longer own? I have never sold a vehicle without buying another and the policies have always been transferred to the next vehicle so I dont know but it doesnt sound right.

[cowboyz]

GB posted while I was typing my post. (must learn to type faster)

[Cibby]

No, they cannot deduct unpaid premium.

Due to case Law you can cancel the instalments from the date the bike was deemed a total loss.

If you have paid the premium in full you do not get a refund.

So better paying premium by instalments.

Thats not 100% correct, it depends on the policy wording and whether the annual premium is paid monthly or if the policy actually renewals monthly when it gets paid.

I'm sure that over 90% of NZ policies are now annual policies paid monthly, it is like a finance agreement. You are required to pay the full amount out of the claim otherwise it makes it really unfair on those people that pay their full premiums upfront...

I had this issue with the old AMP private car policies, the policy actually didnt state that it was an annual policy so AMP had no right to be taking the remaining premiums out of the claims, that was quickly corrected though. haha

It is a service and a courtsey that the insurers even offer monthly installments as insurance traditionally needs to be paid prior to the renewal date for cover to remain in force. It is not an automatic right

If you cancel your policy mid term if you sell your vehicle or dereg etc regardless of whether you are paying monthly or annually, you are entitled to a refund of the pro-rated premium. A total loss claim is the only incident where you are not entitled to a refund.

[Cr1MiNaL]

I say not fair. If a company is willing to take it on as a monthly premium then that is what it should be. I have never cancelled an insurance policy that has been paid monthly but are you saying if you sign up for insurance and 6 months down the track you sell the bike you can not cancel the insurance on it for another 6 months? Seems crazy. Are people paying insurance on stuff they no longer own? I have never sold a vehicle without buying another and the policies have always been transferred to the next vehicle so I dont know but it doesnt sound right.

I should think transfer of a bike is a different issue, as the bike still 'exists'. In this case the bike no longer exists.

GB can you perhaps tell me a little more about this Case wording you are talking about?

[jrandom]

... better paying premium by instalments.

Well, that bears thinking about.

Generally paying premiums by installment costs you 10-20% more than paying annually in advance. You'd have to offset that against the risk of having the vehicle written off and getting a payout.

Also, in my experience, insurance companies refund portions of annually paid-up premiums when you cancel a policy midway through the year. You're paying for risk cover over a period of time - if a risk eventuates, you may or may not need cover for the time following that event. If you don't need cover for that period of time, you shouldn't have to pay for it.

I'd expect to be refunded, and as far as I know, AA Insurance work this way. It bears checking up before choosing an insurer.

[Grahameeboy]

Thats not 100% correct, it depends on the policy wording and whether the annual premium is paid monthly or if the policy actually renewals monthly when it gets paid.

I'm sure that over 90% of NZ policies are now annual policies paid monthly, it is like a finance agreement. You are required to pay the full amount out of the claim otherwise it makes it really unfair on those people that pay their full premiums upfront...

I had this issue with the old AMP private car policies, the policy actually didnt state that it was an annual policy so AMP had no right to be taking the remaining premiums out of the claims, that was quickly corrected though. haha

It is a service and a courtsey that the insurers even offer monthly installments as insurance traditionally needs to be paid prior to the renewal date for cover to remain in force. It is not an automatic right

If you cancel your policy mid term if you sell your vehicle or dereg etc regardless of whether you are paying monthly or annually, you are entitled to a refund of the pro-rated premium. A total loss claim is the only incident where you are not entitled to a refund.

I was referring to annual policies which is what Raj was talking about but I think you will find that I am correct anyway...sorry to disagree.

And yes it does make it unfair on those that pay in full, however, that was the decision of the Case.

[jrandom]

And yes it does make it unfair on those that pay in full, however, that was the decision of the Case.

I would have thought that in the end each individual situation was simply a matter of the details of the contract that the policy document embodied. Presumably the case law you're talking about involved the interpretation of badly-written contracts?

Caveat emptor, etc...

[Grahameeboy]

I say not fair. If a company is willing to take it on as a monthly premium then that is what it should be. I have never cancelled an insurance policy that has been paid monthly but are you saying if you sign up for insurance and 6 months down the track you sell the bike you can not cancel the insurance on it for another 6 months? Seems crazy. Are people paying insurance on stuff they no longer own? I have never sold a vehicle without buying another and the policies have always been transferred to the next vehicle so I dont know but it doesnt sound right.

No Raj is talking about a scenario where his bike gets written off. If you simply cancel you do not have to pay the remainder.

[bane]

I'd expect to be refunded, and as far as I know, AA Insurance work this way.

AA roadcover insurance policy states,

"if we pay you for a total loss, policy will be cancelled from date of loss. Your policy will not be refunded. If policy is paid by installments, we are entitled to collect the unpaid balance of the annual premium, or deduct from the settlement of the claim"


I supposed they dont have to enforce it, but I bet they do!

[Grahameeboy]

I would have thought that in the end each individual situation was simply a matter of the details of the contract that the policy document embodied. Presumably the case law you're talking about involved the interpretation of badly-written contracts?

Caveat emptor, etc...

From memory, it was because the premium was paid by automatic payment rather than a policy renewed monthly which would be different.

Stopped doing claims 2 years ago, however, this was the case then and I doubt it it has changed.

[Grahameeboy]

AA roadcover insurance policy states,

"if we pay you for a total loss, policy will be cancelled from date of loss. Your policy will not be refunded. If policy is paid by installments, we are entitled to collect the unpaid balance of the annual premium, or deduct from the settlement of the claim"


I supposed they dont have to enforce it, but I bet they do!

I know Nzi did not do this................