Compliance of 64 VB for premium payment
At the time of receiving a proposal and/or issuing of Covernote/Policy , the premium is either collected in cash or cheque/Draft or Bank Guarantee.
For small insurances , the premium is generally paid in cash but in large proposals , when the premium is paid by cheque , the insured on many a occasion, may not be having sufficient funds in his bank account . After issuance of cheque , he may deposit money in next 1-2 days , hoping that his account will not be debited earlier than that.
However, there are chances that in large losses, where ever the insurance company gets suspicious, they may resort to compliance of Section 64-V(b) and get the insured’s account certified by his bankers. In case, there was not sufficient balance on the date of issuance of cheque, then the claim settlement may be jeopardized.
Section 64–V(b) of the Insurance Act reads as follows: ”
64–V(b). No risk to be assumed unless premium is received in advance: (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.
Thus , it is imperative that at the time of issuance of cheque , there should be sufficient balance in the account , for the compliance of Section 64(V)b of the Insurance Act