Example of Liability Interruption In Insurance

Mrs. Pearce signs a contract for car insurance on January 01, 2002 with an annual premium payment of 1000 USD. Commission case 4711 is created in the system. The agent, Mr. Avery receives a commission of 5%, being 50 USD, and is 100% liable for the period of one year for the received amount.

Normal Liability

Mrs. Pearce cancels her car insurance on July 01, 2002. Commission case 4712 is created in the system for this.

Mr. Avery is 100% liable for the commission received, and has to pay back 50 USD.

Liability Interruption

On July 01.07, 2002, Mrs. Pearce suspends her car insurance. Commission case 4712 is created in the system for this. In the logical service for the valuation, the interruption indicator is set.

No premium payments during the interruption

  • Constant premium for reinstatement

    Mrs. Pearce does not pay any premiums during the interruption period. The liability period is given a pending status.

    After an interruption of 3 months, the contract is reinstated. Commission case 4713 is created in the system for this.

    Mr. Avery is liable for the 50 USD received from January 01, 2002 to April 01,2003. The liability period has been extended by 3 months.

  • Change to insurance coverage for reinstatement

    Mrs. Pearce does not pay any premiums during the interruption period. The liability period is given a pending status. After an interruption of 3 months, the contract is reinstated on October 01, 2002.

    Premium reduction

    When the contract is reinstated, the insurance coverage is changed, which means that the premium is reduced to 800 USD. Commission case 4713 is created in the system for this.

    Mr. Avery is liable for 40 USD from January 01, 2002 to April 01, 2003 and must pay back 10 USD.

    Premium increase

    When the contract is reinstated, the insurance coverage is changed, which means that the premium is increased to 1200 USD. Commission case 4713 is created in the system for this.

    Mr. Avery is liable for the received commission of 50 USD from January 01, 2002 to April 01, 2003. The premium increase of 200 USD means that Mr. Avery receives an additional commission of 10 USD on October 01, 2002. He is liable for the amount of 10 USD from October 01, 2002 to October 01, 2003.

Premium payments during the interruption period

  • Constant premium for reinstatement

    During the interruption period, Mrs. Pearce pays an annual premium of 500 USD. The liability period is given a pending status.

    Mr. Avery is liable for the share of 25 USD from January 01, 2002 to December 31, 2002.

    After an interruption of 3 months, the contract is reinstated with an annual premium of 1000 USD. Commission case 4713 is created in the system for this.

    Mr. Avery is liable for the other share of the 25 USD from January 01, 2002 to December 31, 2002.

  • Premium payments during the interruption period

    During the interruption period, Mrs. Pearce pays an annual premium of 500 USD. The liability period is given a pending status.

    Mr. Avery is liable for the share of 25 USD from January 01, 2002 to December 31, 2002.

    On October 01, 2002, the annual premium is increased by the insurance company to 600 USD (during the interruption period). Commission case 4713 is created in the system for this.

    Mr. Avery receives another commission payment of 5 USD and is liable for this amount from January 01, 2002 to April 01, 2003.

    On January 01, 2003, the contract is reinstated. Commission case 4714 is created in the system for this. Mr. Avery is liable for the remaining share of 20 USD from January 01, 2002 to July 01, 2003.