The premium for corporate property insurance is rarely the largest item among a company's costs, yet it is the bill that slips most easily: a quarterly instalment is missed because the bank account changed, the accountant changed, or the reminder letter arrived in a mailbox that nobody checks. As a broker, I see that a significant share of “uncovered” losses stem not from an exclusion or underinsurance, but from a simple missed premium – and this is the case where there is no excuse when a claim arises, because the rule is laid down in law. This article shows what happens when a premium is missed, how long the grace period lasts, when the contract terminates, and when it can still be reinstated.
- Under Section 6:449 of the Hungarian Civil Code (Ptk.), the insurer sends a written reminder setting a thirty-day grace period counted from the date the reminder is sent; if it expires without payment, the contract terminates retroactively to the due date – there is no cover for a loss occurring in the meantime.
- Where a subsequent premium is missed, reinstatement can be requested within one hundred and twenty days of termination by paying the arrears, but the insurer is not obliged to agree, and reinstatement typically does not cover losses in the interim period.
- In a corporate, non-consumer contract, the conditions may also deviate from the Ptk. to the policyholder's detriment, so the premium payment chapter of your own conditions governs; keeping premiums paid and reporting a change of address are the company's non-transferable duties.
The Ptk. rule: reminder, thirty-day grace period, retroactive termination
Under Section 6:449 of the Hungarian Civil Code (Act V of 2013, Ptk.), if the premium due is not paid, the insurer – while warning of the consequences – calls on the policyholder in writing to pay, setting a grace period of thirty days from the date the reminder is sent. If the grace period expires without payment, the contract terminates with retroactive effect to the due date – unless the insurer enforces the premium claim in court without delay. Two points are worth highlighting. First: the grace period runs not from the due date but from the date the reminder is sent; the law says thirty days, and conditions may give a longer grace period – several Hungarian conditions provide for a grace period of “at least 30 days”. Second, and more painful: the termination is retroactive. If the instalment was due on 1 January, the reminder was sent in January and the grace period expired in February, the contract terminates as of 1 January – so there is no cover for a fire in February, even if the company only finds the letter in March. Hungarian corporate conditions typically adopt this rule – some conditions deviate in the client's favour and tie termination not retroactively but to the day the grace period expires – and many conditions also state expressly that a contract terminated for non-payment is not brought back into force merely by paying the premium later.
First premium and subsequent premium: not the same situation
The start of the insurer's risk-bearing is set by the contract – I wrote about this in the article on the start of cover – but the consequence of failing to pay also depends on which premium is involved. If the first premium is missed, the contract terminates when the grace period expires, and the law provides no option for reinstatement: a new contract has to be concluded, with a new risk assessment. If a subsequent premium – the second year's premium, a quarterly or monthly instalment – is missed, under Section 6:449(2) of the Ptk. the policyholder may, within one hundred and twenty days of the date of termination, request reinstatement of the insurance by a statement addressed to the insurer, and the insurer may reinstate the cover under the conditions of the terminated contract, provided that the premium that fell due earlier is paid. The precise reading of the wording matters: reinstatement can be requested, but the insurer “may reinstate” – it is not obliged to, and practice differs from insurer to insurer. Nor is it wise to count on reinstatement providing cover retroactively: under the conditions, the reinstated contract typically does not extend to losses occurring between termination and reinstatement.
Instalments, deferred payment, court action: three twists
Quarterly or monthly premium payment is common in corporate contracts. In that case it is not that “one instalment is missing”: the entire contract terminates as of the due date of the instalment, with all its cover – from fire to burglary. Deferred payment is different: if the parties agree in writing that the premium will be paid later, the due date moves, and the grace-period rule applies only from the new date; this agreement, however, is the insurer's decision, not a unilateral request by the policyholder. The third twist is court action: under the Ptk., the contract does not terminate if the insurer takes the premium claim to court without delay – in this case the cover remains in place, but the premium is payable together with the consequences of late payment. Moreover, in a corporate, non-consumer contract, the consumer-protection rule of Section 6:455 of the Ptk. does not apply, so the conditions may also deviate from the statutory insurance rules to the policyholder's detriment; the premium payment chapter of your own conditions therefore governs – the reading policy conditions article offers a method for working through it.
Why do premiums slip at companies, and how can this be prevented?
The typical causes have nothing to do with bad faith. The bank account from which the direct debit ran was closed or changed; the bank card expired; the insurer sent the reminder to the old address on the policy because the company moved or the contact person left; the payment slip went astray; within the company, keeping premiums paid was nobody's job. The common denominator is that posting the reminder is the insurer's job, but receiving and reading it is the company's: reporting a change of address, e-mail address or bank account is the policyholder's non-transferable obligation – the article on reporting changes in your details covers this. A few simple routines help a great deal: have one person responsible for insurance premiums; enter the premium due dates in the company's payment calendar; make sure that notifications arriving via the insurer's client portal or by e-mail are not seen only by the accountant; and once a year – when the insurer's renewal notice arrives – check that the payment method and the bank account are still valid.
What should you do if it has already happened?
If the company notices that a premium has been missed, the first step is not guesswork but establishing the facts: ask the insurer's customer service or check its portal whether the contract is still in force, whether a reminder has been sent, and when the grace period expires. If the grace period is still running, paying the premium lets the contract continue without interruption. If it has already expired and a subsequent premium was involved, the next option is the one-hundred-and-twenty-day reinstatement request – in writing, together with payment of the premium in arrears. If that is not possible either, a new contract is needed, and until then the site stands without cover; in this case – if you let me know – I prepare the quote request and the paperwork so that the uncovered period is as short as possible. A dispute after a loss is a different matter: if the insurer declines the claim on the grounds that the contract terminated for non-payment, what needs to be examined is whether the reminder was sent in accordance with the Ptk. and the conditions – with the proper content, to the notified address, with the proper grace period. In a case that is stuck or disputed, I help where I can, acting on the company's behalf; the decision is made by the insurer, and for companies a legal dispute is decided by the court, because the Financial Arbitration Board (PBT) handles only consumer cases – those brought by private individuals.
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Sources
- Hungarian Civil Code (Ptk.) – Act V of 2013, Section 6:449 (failure to pay the premium, grace period, reinstatement), Section 6:445 (start of risk-bearing), Section 6:455 (in consumer contracts deviation is allowed only in the client's favour – does not apply to corporate contracts)
- UNIQA All Risks property and business interruption insurance conditions (31 July 2024), point 1.2 – premium payment, consequences of non-payment
- K&H all risks property insurance contract conditions (1 January 2016), point 1.4.2 – failure to pay the premium: grace period of at least 30 days; later payment does not revive a terminated contract
- Judit Barta: The insurance contract – lecture outline (University of Miskolc, Faculty of Law): the rules of Ptk. Section 6:449
- MNB (Hungary's central bank and financial supervisor) – Financial Arbitration Board (PBT): the forum for consumer disputes
