Page 52 - IC23 life insurance application
P. 52
As we have said earlier First Premium Receipt is the evidence of a concluded
insurance contract. As per this contract, the insured has the responsibility of paying
the instalment of premium regularly as per the details mentioned in the policy
document. The schedule of the policy document mentions on which dates the
premium has to be paid. Whenever such premium is offered, the insurer issues a
receipt. All such receipts issued after the First Premium Receipt are called renewal
receipts and are accepted as evidence of the discharge of the insured’s
responsibility of paying the premium from time to time.
Here it is necessary to emphasise a point which quite often creates confusion and
even legal problems. An agent is an agent of the insurer to canvass insurance and is
also authorized to collect the initial deposit towards first premium. This he is obliged
to deposit with the insurer within 24 hours. But an agent is not authorized to collect
renewal premium. None the less agents do collect renewal premium from the insured
and deposit with insurance company almost regularly. An insurance agent becomes
eligible to the renewal commission only when the renewal premium is deposited with
the insurer. He has therefore a vested interest in the payment of the renewal
premium. Normally this does not create any problem. The problem arises only when
the agent collects the renewal premium either by cash or cheque and before he is
able to deposit the amount in the insurance office, the policyholder dies and
consequently a death claim arises.
In such a case if the policy has lapsed due to non-payment of renewal premium and
the claim is not payable even according to claim concession rules, the insurer denies
any responsibility to pay the claim. Payment to agent, let it be clearly understood,
does not tentamount to the payment to the insurer. There are a plethora of court
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