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Debit Order Payments

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What is important to remember when paying my insurance premium by debit order?

Payment of premiums promptly and on the due date to your Insurer is usually essential to keep your policy active and ensure continuous cover. When you need your policy most - that is when you sustain a loss against which you are covered, the fact that premiums are not up-to-date can mean rejection of your claim by the Insurer. Even if there is no claim, non-payment of a premium on due date can sometimes bring about immediate cancellation of your policy.

The Short-Term Insurance Act gives you certain protection, in that if your premiums are promptly paid to your Broker, having authority to receive them, they are regarded as having been paid to your Insurer.

The Policy Holder Protection Rules in terms of Section 55 of the Short-Term Insurance Act of 1998 also gives you certain protection against the unilateral termination of a debit order or policy.  The insurer may not unilaterally terminate any current debit order signed by you without having informed you in writing of the intention to do so at least 30 days before the effective date of the envisaged termination.  The Policy Holder Protection Rules also require an insurer to provide for a period of grace for the payment of premium which is not less than 15 days after the due date, provided that in the case of a monthly policy this provision only applies with effect from the 2nd month of the currency of the policy.  Consequently if you fail to pay your premium for any reason, you will be entitled to pay the outstanding premium within a period of 15 days of the due date.  If you miss a premium payment for any reason you should immediately contact your insurer and arrange to pay the premium within the period of grace or make some alternative arrangement with the insurer for the payment of the premium such as a double debit in the next month.  You should also note that some insurers do not accept cash payments of premiums.

To ensure prompt regular payments, Brokers and Insureres will encourage you to sign a Debit Order as a Stop Order at your Bankers. Whilst this is indeed a very useful method of meeting your commitments, there are very real dangers attached which only care and vigilance on your part will avoid.

  1. If possible, try to arrange that your order to the Bank is one that can be cancelled on notice to the bank by you alone. This is a Stop Order. A debit order can usually only be cancelled with the agreement of both the customer and the creditor. The number of complaints, where, because of this, orders are still being deducted for months after you say the insurance should have come to an end, runs into hundreds every year.
  2. Don't sign a debit order which gives your broker, in effect, the right to alter or increase your payment whenever he wishes to do so. If the premium is to increase, you must be given notice, and your broker should inform you of the increase well in time for you to authorise any additional payment or cancel the policy.
  3. Check your bank statement regularly, and better still, get a mini-statement every month from your banker shortly after the order was due to check that it has gone through.
  4. The Insurance Act now gives you added protection against a situation where the payee of the debit order can be altered without your consent. Ensure that the debit order is worded so that, there can only be one named payee.

If your insurer contends that the debit order has not been met, find out why and attend to the payment thereof urgently.