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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part II)

Suraj Mehta, a prospective policyholder in Pune, hands a cheque for the full first premium on a motor policy to Kavita Insurance Ltd on 10 March. The premium is ascertainable in advance and the policy is for a risk in India. Under Section 64VB of the Insurance Act, 1938, from when may the insurer assume the risk?

The insurer may assume the risk from the date the premium is paid by cheque to it, here 10 March. Section 64VB(2) links the start of risk to payment in cash or cheque when the premium is ascertainable in advance, not to clearance or document issue.

  1. AFrom the date the premium is paid by cheque to the insurerCorrect
  2. BFrom the date the cheque is cleared at the insurer's bank after seven days
  3. CFrom the date the policy document is printed
  4. DFrom the date the agent forwards the proposal form

Explanation

Section 64VB(2) says that where the premium can be ascertained in advance, the risk may be assumed not earlier than the date the premium has been paid in cash or by cheque to the insurer. Suraj tendered the cheque directly to the insurer on 10 March, so that date is the earliest. Clearance, printing or proposal dates are not the test.

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