Cancellation of Insurance Contracts

Question 1

What is a cancellation condition?

Answer 1

Condition in policy which allows the insurer to cancel (provided a letter is sent to the insured’s last known address) giving 14 days notice of cancellation.

Question 2

What are customer’s rights in regards to cancellations?

Answer 2

Customer’s have the right to cancel without penalty/giving reasons for most insurances (exception is travel and baggage as these policies are for less than a month).

Payment protection contracts - 30 days to cancel
Any other contract - 14 days to cancel

Question 3

Reasons why a contract may be terminated?

Answer 3

• Fulfilment (total loss of subject matter i.e house burnt down in a fire)
• Voidable contracts (circumstances set aside in a contract which give rise to voiding a policy i.e. insured is required to maintain their equipment but doesn’t do this, insurer can void contract)
• Breach of warranty (situations where an insurers liability is automatically discharged as stated in the Marine Insurance Act. Insurance Act means that now a breach of warranty is no longer an immediate termination, instead the insurer isn’t liable during the period of suspension)
• Fraud (Insurance Act states insurer can terminate contract and keep premium)