Meaning of Insurance Renewal| Step by Step Guides

Meaning of Insurance Renewal

Insurance policies are just for a short while and such, they don’t last forever, However, Most policies have a policy period of one year. During this period, the insurance provider won’t make changes to the policy’s premium or coverages (except in special circumstances).

When you start a new insurance policy, your premium is locked in for the length of the contract’s policy period. It’s usually one year, but some policies renew twice a year.  Most non-life insurances are usually contracted for a period of one year. at the end of this period, the insurance lapses unless it is renewed before the expiry date.

The parties to the insurance contract may, however, mutually agree to renew the policy. Renewal is not automatic. The exception in this respect is life assurance contracts which are long-term in nature.

As a general rule, renewal is contemplated by the language of the policy and is provided for by special terms in the policy. Renewals are invited or negotiated as though they were a new contract.

The legal position about whether a renewal is a new contract or merely the continuance of an existing one has never been finally resolved. Although renewal must be negotiated, the enquiries are nowhere near as searching as with the original contract. Nevertheless, the role of utmost good faith revives at renewal and the insured is obliged to disclose any material alterations in the risk.

The insurance renewal happens at the end of the policy period. At renewal time, the insurer adjusts coverages and premiums before starting the next policy period. Premiums can either increase or decrease. The insurer can also choose not to renew the policy, though they’ll only do that in certain uncommon circumstances.

The timing of insurance renewal isn’t the same for everyone; it’s based on when the policy went into effect, so it can be any day of any month.

The insurance company will send their customers a notice of renewal about one month before each renewal happens. This notice tells the customer how their premiums will change after the renewal, and if there are any adjustments to their coverage.

Also, there are some contracts in fire insurance where the insured gives an undertaking to offer the risk for renewal, for a fixed minimum period, in return for a discount on his premium ( the insurer, however, is not obliged to accept the renewal)…

Apart from this type of long-term agreement, there is no legal obligation either to seek or invite renewal. The contract is for a certain period, usually a year, and neither the insured nor the insurer is obliged to continue the contract for a further period.

What do I need to do at renewal time?

When you receive your renewal notice, sometimes you don’t have to do anything at all. If you continue to pay your premiums, your insurer will renew your policy for another year.

However, renewal time is a good chance to review your policy to make sure that your coverage is adequate. Take a few steps to ensure you’re still getting the coverage you need:

• Review the details. Small mistakes can fly under the radar. Take a moment to review the details on your policy like your address or the names of insureds to make sure they’re all correct.
• Think about any big changes you’ve made since your last renewal. Did you do some renovations? Make a big-ticket purchase? Check that your limits of coverage are high enough for any additions you’ve made and ask your insurer to bump up your limits if they’re not. If the occupancy or use of your home has changed – like starting to rent the home to others – don’t wait for renewal time; let your insurer know immediately.
• Review your limits of coverage. Even if you didn’t make any significant changes during the year, it’s worth thinking about your limits of coverage. Are they too low? Are they too high? Is your deductible still appropriate? Renewal time is the best chance to make changes to your policy.
• Check your payment method. Make sure the method of payment that you gave your insurance company is still up to date, particularly if you pay annually. A valid payment method ensures that your renewal will go through smoothly.

Underwriting Consideration Arising from Renewal

Even if renewal is invited, there is no obligation to offer terms on exactly the same basis as for the previous year. Instead, many considerations may arise which will mean that the terms should be varied, either in favour of the insured or in favour of the insurer, as the case may be.

It is the underwriter’s duty to make a fresh apraisal of the contract at renewal, or preferably a short time before, to see whether any amendments of terms are necessary.

Life policies and permanent sickness personal accident policies are arranged on the basis that the insurer is not permitted to come off risk, or impose different terms at the policy anniversary date, even though the risk may have deteriorated substantially provided the policyholder continues to pay premiums and complies with any policy requirements, the renewal must go through on the terms originally arranged. This is an exception to the general rules and applies because the nature of the contract is long-term.

It would be quite inquitable for the position to be more otherwise, and naturally, the premiums are calculated to take this aspect into account. However, if the policyholder allows the policy to lapse due to non-payment of premium, new terms may be imposed if his state of health has deteriorated as fresh consideration will be given to his assurance upon request for its reinstatement.

How do I renew my insurance policy?