LAW OF OBLIGATION ACT, PART 4, CHAPTER 23, DIVISION 5

Division 5

Insurance Premium

  • 453. Period of insurance

A period of insurance is the period of time based on which insurance premiums are calculated. It is presumed that a period of insurance lasts for one year.

  • 454. Payment of insurance premium

(1) A policyholder shall pay the insurance premium or, in the event of an agreement to pay periodic insurance premiums, the first insurance premium immediately after entry into the contract.

(2) If the policyholder is to be issued with a policy, the policyholder may refuse to pay the insurance premium until the policy has been issued to the policyholder.

(3) It is presumed that the beginning of each new period of insurance is the due date for payment of the insurance premium for the subsequent period of insurance.

  • 455. Payment of insurance premium by third party

(1) An insurance premium which has become collectable or another amount payable pursuant to an insurance contract may, rather than by the policyholder, be paid by the insured person or the beneficiary or a pledgee in whose favour the claim of the policyholder against the insurer arising from the insurance contract is pledged. The insurer shall not refuse to accept payment from the above-mentioned person even if the insurer could refuse to accept the payment pursuant to the provisions of the General Part of this Act.

(2) If an insurance premium is paid by the insured person or the beneficiary or a pledgee, the insurer’s claim for payment of the insurance premium against the policyholder transfers to the person who made the payment to the extent that the claim is satisfied. If a payment pursuant to an insurance contract is made by a pledgee, the pledgee’s claim against the policyholder shall be secured by a pledge on the policyholder’s claim against the insurer.

  • 456. Right to set-off insurance premium

An insurer may set off an insurance premium which has become collectable or another claim which belongs to the insurer pursuant to a contract against the insurer’s performance obligation even if the insurer owes performance of an obligation arising from the contract to a third party other than the policyholder. The insurer does not have such right with respect to the injured party in obligatory liability insurance.

  • 457. Delay in payment of first insurance premium

(1) If a policyholder fails to pay a single premium or the first premium within 14 days after entry into the insurance contract, the insurer has the right, as long as the premium has not been paid, to withdraw from the contract. The insurer is presumed to have withdrawn from the contract if the insurer does not file an action to collect the insurance premium within three months after the premium becomes collectable.

(2) If the insurance premium or first insurance premium which has become collectable has not been paid by the time the insured event occurs, the insurer shall be released from its performance obligation.

(3) The insurer shall not rely on the provisions of subsections (1) and (2) of this section if the insurer did not inform the policyholder of these consequences prior to entry into the contract.

[RT I 2002, 53, 336 – entry into force 01.07.2002]

  • 458. Delay in payment of subsequent insurance premiums

(1) If the policyholder fails to pay the second or a subsequent premium in time, the insurer may, in a format which can be reproduced in writing, set a term of at least two weeks or, if a structure is insured, one month for the policyholder to pay. In the notice, the legal consequences resulting from the expiry of the term shall be indicated.

(2) If the insurer has set an additional term for the payment of an insurance premium and the insured event occurs after the expiry of the term and if at the time of occurrence of the insured event the policyholder is in default with payment of the insurance premium, the insurer shall be released from its performance obligation, unless failure to pay the insurance premium was due to circumstances beyond the control of the policyholder.

(3) If the insurer has set a term for payment specified in subsection (1) of this section and the policyholder fails to pay the insurance premium within the specified term, the insurer may cancel the insurance contract without prior notice. The insurer may state in the notice specified in subsection (1) of this section that it will consider the contract as having been cancelled upon expiry of the term if the policyholder fails to pay the premiums within the term.

(4) If the policyholder pays the insurance premium within one month as of the cancellation of the contract or the expiry of the term for payment and the insured event does not occur before payment, the contract shall not be deemed to have been cancelled in the case specified in subsection (3) of this section.

[RT I 2002, 53, 336 – entry into force 01.07.2002]

  • 459. Payment of insurance premium upon termination of contract

If an insurance contract is terminated prematurely during a period of insurance by cancellation or withdrawal or for any other reason, the insurer is entitled to the insurance premium only for the period of time up to the termination of the contract.

  • 460. Insurer’s right to demand increase of insurance premium

(1) If, upon entry into a contract, the policyholder has violated the obligation to notify provided for in § 440 of this Act, the insurer may demand payment of a reasonably higher insurance premium by the policyholder as of the beginning of the current period of insurance and if the insurer does not have the right to withdraw from the contract since the violation of the obligation to notify was not due to the fault of the policyholder and the higher premium is reasonable given the increased probability of the insured risk.

(2) The insurer shall not demand an increase of the insurance premium under the circumstances specified in subsection (1) of this section later than within one month as of becoming aware of the facts of which the policyholder did not inform the insurer.

  • 461. Policyholder’s right to cancel contract upon increase of insurance premium

If the insurer increases the insurance premium pursuant to the terms of the insurance contract without changing the insurance cover, the policyholder may, within one month after receipt of the insurer’s notice, cancel the insurance contract as of the effective date of the increase.

  • 462. Policyholder’s right to demand reduction of insurance premium

(1) A policyholder may demand the reduction of the insurance premium for subsequent periods of insurance if a larger insurance premium was agreed upon due to circumstances increasing the insured risk and such circumstances cease to exist or become insignificant within the period of time between the submission of an application to enter into a contract and entry into the contract or thereafter or if the insured risk has continuously decreased during such period of time.

(2) The provisions of subsection (1) of this section shall also apply if a higher insurance premium was agreed upon because the policyholder provided erroneous information concerning circumstances increasing the insured risk.

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