Exceptions to the Cash and Carry Rule of State Auto Insurance Policies

save insuranceThe principle of “cash and carry rule”, which states that the contract of insurance is unenforceable until premiums have been paid, is not absolute in some state auto insurance legalities. Here are some exceptions:

The first one is a grace period. Whenever the car insurer has expressly granted extension of premium payments, the policy will not be suspended. Hence, the insurer is liable to pay the insured (i.e. car owner) if the car has been damaged during the extension granted by the insurer.

Next is acknowledgement of receipt. There is no doubt that the actual payment of premiums is immaterial once the car insurer has acknowledged a receipt of payment of premiums. Therefore, whether premiums are truly paid or not, as long as the car insurer recognizes the receipt as genuine and accepts the same, the policy cannot be suspended.

The last exception is installment. The system of installment is also well-recognized in the field of car insurance. There are cases where car insurers charge relatively higher premiums compared to an ordinary car insurance contract. And because of that, the company would much likely allow payment by way of installment. Therefore, even though the whole premiums have not been paid, but the same is continuously being paid by way of installment, the car insurer would still be liable to damages or loss.