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What Is Time On Risk?

Posted By on 16-12-2020
What Is Time On Risk?

If there is one thing that is commonly misunderstood or downright unknown by insurance consumers it is Time On Risk, a concept that needs to be better understood with the idea in mind that knowledge is the best insurance!

 

One of the fundamental premises of insurance is the “promise to pay”, the idea that when an insurance contract is signed the insuree will pay the premium.

Insurance is a contract established between the insurance company, the insurer, and the client, the insuree.

Typically they provide this coverage on an annual basis, with multiple payment options available but quite often set up on a monthly payment plan.

When an insuree does not make their regular monthly payment, or the renewal date passes and a full payment isn’t made, it starts a process to rectify the situation, first with notification being sent to the insuree about the arrears.

Of course, things in life happen and people make mistakes, forget to pay their bills or get caught up in some other such circumstances that lead to this situation. The insurance industry knows this and allows a certain grace period for that missed payment, using that premise of the “promise to pay” that was mentioned earlier. Notifications are sent out and attempts are made to reach the client and rectify the issue but, if the financial obligation is not met, the cancelallation process begins and the client is sent a registered letter explaining that they have been cancelled and now have no insurance.

But, what about that time period from when the payment was supposed to made and when the insurance company officially cancelled the insurance policy?

 

“Time On Risk” And How It Relates To The Cancellation Process.

While waiting for the payment the insurance company assumed the client was going to pay their premium and therefore was providing insurance coverage as arranged in the insurance “contract”. Basically this means that while waiting for such payment to be made, the client was protected by their policy. After the grace period ends, the insurance company now must assume that you either do not want to be insured anymore or can no longer uphold your part of the contract to pay for the service and they officially cancel your policy.

“Time On Risk” is the period from which you last made your monthly payment, or your official renewal date in the case of a yearly payment plan, up to the point when you are officially cancelled. Under the premise of the insuree wanting to be insured and promising to make payment, they are obliged to pay the cost of that time period since they were technically covered by the insurance policy.

 

Three Consequences Of Being Cancelled For Non-Payment!

  1. It goes on your insurance history, which is shared with all insurance companies
  2. No insurance company will provide you with insurance if there are outstanding premium balances, including money owed for time on risk.
  3. It may be impossible to get a payment plan and you will be forced to pay your premium up front and in full.

 

So what does BlueCircle advise to our clients for avoiding time on risk charges and being cancelled for non-payment?

  • We ask that you always keep your contact information updated, so you can always be reached. It’s why we ask our clients about it every time we speak to them, but also advise them to inform us of any change of address or phone number when they occur.
  • We request any cancellation of a policy to be done in writing, be it electronic or otherwise. Though we do record our phone calls as part of our committment to providing better service, having a written record will verify authenticity and it can be kept on our files for future reference.
  • We suggest that if there may be payment issues, you contact us immediately and advise us of the situation. We’re not always able to prevent subsequent actions by the insurance company but we’ll certainly do our best to help sort it out and help our clients avoid unnecessary fees and compounding problems.
  • We may be able to arrange for interim financial arrangements through our partnering company, 6 Degrees Financial. It doesn’t work for everyone but we’ll discuss it and if our clients meet the qualifying criteria we’ll do what we can to get it approved.

Left unresolved, failure to pay an insurance premium becomes a big problem and it’s better to work out some terms or settle the payment delinquincy with the insurer before it gets to the cancellation stage. BlueCircle is a proud member of the Insurance Brokers Association Of Alberta and we are committed to working diligently on behalf of our clients to represent them within the insurance industry.

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