A company's insurance portfolio contains five to ten contracts running side by side, each with its own due date and its own collection method. All it takes is an expired bank card, a rejected direct debit, a change of accountant or a wrong email address, and one of the premiums quietly goes unpaid. As a broker, I see that a significant share of uninsured losses at companies stems not from a missing policy but from a forgotten premium – and it is only at the moment of the loss that it turns out the contract has not been in force for weeks. This is not ill will on the insurer's part but the clear timetable set by the Hungarian Civil Code (Ptk.). If you know it, there is some room for manoeuvre; if you don't, you learn it at the most expensive point.
- Under Section 6:449 of the Hungarian Civil Code (Ptk.), if a premium is not paid, the insurer calls on the policyholder in writing to pay, warning of the consequences and setting a 30-day grace period counted from the date the reminder is sent; if this is unsuccessful, the contract terminates with retroactive effect to the due date.
- If the contract terminated because a subsequent premium was not paid, the policyholder may request reinstatement in writing within 120 days of termination; the insurer may reinstate cover provided the outstanding premium is paid – this is an option, not an obligation.
- Compulsory motor third-party liability insurance (MTPL) is governed by a different act, the Gfbt.: there the contract terminates on the sixtieth day after the due date, and for the given insurance period it can only be taken out again with the previous insurer, with an uninsured-period fee (fedezetlenségi díj) payable.
The Civil Code timetable: reminder, grace period, termination
Under Section 6:449 of the Civil Code, if a premium that has fallen due is not paid, the insurer – warning of the consequences – calls on the policyholder in writing to pay, setting a 30-day grace period counted from the date the reminder is sent. If the grace period expires without result, the contract terminates with retroactive effect to the due date, unless the insurer enforces its premium claim in court without delay. Two details are decisive. The first is that the grace period runs from the date the reminder is sent, not from the due date: in practice, therefore, the “grace period” is longer than thirty days, but its length is set by the rhythm of the insurer's correspondence, not by you. The second is that the reminder is sent to the address given in the contract – if the company has moved or the contact person has left, the letter may arrive without anyone reading it. Hungarian policy conditions typically adopt the wording of the Civil Code; some insurers offer a longer grace period or more flexible reinstatement – this is a point worth checking in your own policy conditions.
Section 6:450 of the Civil Code also lays down a rule for cases where only part of the premium has been paid: if the insurer has called on the policyholder to pay the balance without result, the contract remains in force, with an unchanged sum insured, for a period proportionate to the premium paid. Paying half of a quarterly premium therefore does not give you “half-premium” cover, but cover that lasts for a shorter time.
Why does retroactive termination hurt?
Termination takes effect not on the day the grace period expires but retroactively, as of the due date. If the premium was due on 1 January, the reminder went out in mid-January and nobody paid by mid-February, the contract has not been in force since 1 January – a burglary or a burst pipe on 20 January also remains uninsured. If, however, the premium arrives within the grace period, cover is continuous, and a loss occurring in the meantime also falls to the insurer. This rule is what makes the premium reminder one of the most important letters in the portfolio: it is not a courtesy notice but a deadline. The article on the start of cover shows the same idea from the beginning of the contract: at both ends, cover is tied to the premium.
120 days: what can be reinstated?
Under the Civil Code, if the contract terminated because a subsequent premium was not paid, the policyholder may ask the insurer in writing, within 120 days of the date of termination, to reinstate cover; the insurer may reinstate cover on the terms of the terminated contract, provided that the premium that fell due earlier is paid. The key word is “may”. The insurer has discretion, and Hungarian practice varies from insurer to insurer as to whether it bears the risk for the intervening period, asks for a declaration that no loss has occurred, or offers a new contract instead. So you cannot plan on this option, but if the worst has happened, this is the first route: in writing, quoting the policy number, and settling the outstanding premium at the same time. Beyond the 120 days, what remains is a new policy – with a new underwriting assessment, possibly on different terms, and with the fact of termination for non-payment in your claims history.
MTPL and fleets: a different law applies here
Compulsory motor third-party liability (MTPL) insurance for company cars is governed not by the general rule of the Civil Code but by the Gfbt. (Act LXII of 2009 on compulsory motor third-party liability insurance), and the timetable is different. According to guidance from MABISZ (the Hungarian insurers' association), the insurer sends a reminder by the end of the thirtieth day after the premium due date, warning of the consequences and setting a sixty-day grace period counted from the due date; if this is unsuccessful, the contract terminates on the sixtieth day after the due date, and the insurer notifies the keeper of the vehicle of the termination within fifteen days. After that, for the remainder of the given insurance period the contract can only be taken out again with the previous insurer, and an uninsured-period fee (fedezetlenségi díj) must be paid for the days that passed without insurance – this is a sanction, and no insurance benefit is provided in return. With a fleet, a missed premium therefore affects not one car but every vehicle on the road at the same time; this is why the article on fleet insurance treats premium payment as a separate process.
At portfolio level: where does it slip?
Typical mistakes arise for organisational rather than financial reasons: three contracts paid by direct debit, two by bank transfer, one from the former managing director's personal card; the premium reminder goes to the company's old registered office; the accountant does not know that the insurance premium is an urgent item; the reminder is put into a “we'll look at it later” folder. That is why the renewal table does not only track expiry dates: one column is for the due date, one for the payment method and one for the person responsible. It is important to say clearly that paying premiums is your company's non-transferable obligation: the reminder is sent by the insurer, and neither the insurer nor I monitor premium payments on your behalf. What I do take on: if a reminder arrives and it is not clear which contract and which deadline it concerns, I help you interpret it on the basis of the policies, and if the contract has already terminated, I help where I can in putting together the reinstatement request.
What should you do now?
Go through your portfolio inventory and, next to each contract, note the due date, the payment method and whose name the reminder is addressed to. Standardise collection where possible, and check that the company's registered office and email address are up to date with the insurers. If a premium reminder arrives, pay within the grace period and keep the transfer confirmation with the policy. If the deadline has already passed, do the arithmetic: within 120 days of termination you can request reinstatement in writing, settling the outstanding premium. If you are unsure which contract is affected, contact me with the reminder and the policies – I help you go through what is in force, what is not, and what can still be put right. Non-payment of premium comes first among the common reasons for claim rejection because it is the only one that the company itself can prevent entirely.
Have a question about the premium payment arrangements in your own portfolio? Book a free 20-minute consultation →
Sources
- Hungarian Civil Code (Ptk.) – Act V of 2013, Section 6:449 (Consequences of failure to pay the premium)
- Gfbt. – Act LXII of 2009 on compulsory motor third-party liability insurance (Section 21: termination for non-payment of premium; Section 22: uninsured-period fee)
- MABISZ (Hungarian insurers' association) – Frequently asked questions: What does the obligation to pay the premium mean? (MTPL non-payment)
- MABISZ – Compulsory motor third-party liability insurance (MTPL) FAQ (taking out cover again, uninsured-period fee)
