WHAT IS INSURANCE?

Insurance contract is explained in Article 1401 of the Turkish Commercial Code. Based on the article of the law, contracts that impose debt on both parties, in which the policyholder undertakes the premium payment and the insurer undertakes the insurance guarantee obligation, are called insurance contracts. Premium, insurance amount, insurance benefit and risk are the basic elements of this contract. The main rule for establishing a contract is the existence of interest. An insurance contract can be established in writing or verbally by agreeing on the mandatory elements of the contract. There must be agreement of will in insurance contracts. However, if the insurer does not respond (rejects or does not offer a different suggestion) to the offer within 30 days, the offer is deemed to have been accepted and the insurance contract is established.

Risk, which is one of the basic concepts of insurance law, means the possibility of suffering a loss, in its simplest words, risk. In other words, events that may cause damage are called risks and can be insured. For an event to be considered a risk, there must be uncertainty about its occurrence or it must be unknown when it will occur. For example, in traffic insurance, it is uncertain whether an accident will occur. In life insurance, death will certainly occur, but the timing is uncertain. In short, a contract cannot be made for a risk that has occurred or has become impossible to realize. In addition, the scope and limits of the risk should be clearly defined in the contract. Because TTK. m. According to Article 1409/1, the insurer is responsible for damages arising from the realization of the risk foreseen in the contract. However, Insurance Law art. According to 14/4, it is emphasized that in addition to the risks included in the scope of the contract, the risks excluded from the scope must be clearly stated. Risks that are not clearly stated to be out of scope in the contract are considered within the scope of coverage and the insurer's liability exists in these cases as well.

Payments made by the policyholder to the insurer at regular intervals are called insurance premiums. Premium calculation is made according to the value of the insured property and the probability of the risk occurring. For example, higher premiums must be paid for a risk that has a 90% probability of occurring. On the other hand, it is possible to get insurance with lower premiums for risks that are less likely to occur.

What Happens If Insurance Premium Is Not Paid?

In case of damage insurance, insurance protection will not start if the first premium is not paid. If the insurer sues for the first premium, the policyholder may withdraw from the contract by paying half of the agreed premium. At the same time, the insurer may withdraw from the contract within three months unless payment is made. If subsequent premiums are not paid, the insurer may terminate the contract to end the protection, although the insurance protection continues. Insurance protection will continue until the end of the period given for termination. The insurer warns the policyholder, through a notary or by registered letter, that he must fulfill his debt within ten days, otherwise the contract will be terminated. If premium payment is not made within this period, the contract will be terminated. Additionally, if two warnings are sent within an insurance period, the insurer may terminate the contract at the end of the insurance period.

In life insurance, insurance protection does not start if the first premium is not paid. If the insured dies before paying the first premium, the insurance contract becomes invalid. In case the subsequent premiums are not paid, in accordance with the article 1501 on lending money, the insurer must lend money to the insured, upon the request of the insured, based on the value calculated in accordance with the actuarial rules.  According to Turkish Commercial Code Article 1502, if the policyholder does not fulfill his premium payment obligation later, the insurer cannot terminate the contract or demand premium for this reason. The insurance fee is calculated as the ratio between the premium paid and the premium to be paid in accordance with the contract and paid accordingly. This is called premium-free insurance.

What is the Insurer's Indemnification Obligation?

Payments made by the insurer to the insured in return for the damage suffered in case the risk specified in the contract occurs are called insurance compensation. The extent to which the damage will be covered will be determined according to the content of the contract, and the insurance compensation cannot exceed the value of the insured goods. As a rule, the insurance amount and the insurance value should be equal. In other words, the maximum price that the insurer is obliged to pay should be equal to the value of the insured interest. There is no obligation to pay compensation in cash. For example, within the scope of motor insurance, the insurer pays the compensation debt by replacing parts such as the engine, hood and bumper damaged in a traffic accident with a new one.

What are the Insurance Types?

There are different types of insurance depending on the risks covered. While some of these insurance types, which have different features, are mandatory, some are optional. Briefly, the most common types of insurance we encounter in daily life are as follows:

• Traffic Insurance: It is a type of compulsory insurance. It is done to compensate the other party for the damages suffered in case of an accident.
• Automobile Insurance: Can be obtained optionally. It is done to compensate the damages suffered by the vehicle owner due to the accident.
• DASK Insurance: It is mandatory for home owners to have it. It is done to cover the damages suffered due to the earthquake.
• Life Insurance: It is taken out to compensate for the financial losses incurred if the insured dies, becomes disabled, or becomes unable to work.
• Private Health Insurance: Optional. With this insurance, health risks are covered within the policy limits.
• Private Pension Insurance: Unlike other insurance, it is a savings model that aims to invest in the future.

What is the Difference between Insured and Insured?

The person who concludes the insurance contract and is obliged to pay the premium is the policyholder. What should be noted here is that the insured person can make the contract for his own benefit or for the benefit of a third party. The said third party is defined as the insured. In this case, the debts arising from the insurance contract are transferred to the policyholder; The rights belong to the insured. In this case, the insurer provides assurance against the risk that the insured may be exposed to. However, the party making the premium payment is the policyholder, not the insured.

What is Recourse?

Recourse can be explained as taking the material damage incurred in the thing subject to the insurance contract from the faulty party. When damage occurs to the things that constitute the insurance policy, the insured applies to the insurer and requests that the damage be covered. The insurer covers these financial damages. He can then take legal action to collect the amount he paid against the persons who caused the damage. To the extent that the insurer compensates for the damage, it becomes the successor to the rights of the insured. The concept that allows the insurer to collect the amount paid by the insurer from the faulty persons who caused the damage to occur is recourse.

How Many Years is the Statute of Limitations in Insurance Contracts?

While general provisions apply to loss and life insurance, special provisions apply to liability insurance, which is a sub-branch of loss insurance. According to general provisions, the lower limit of the limitation period is two years and the upper limit is six years. According to the special provisions applied in liability insurance, the limitation period is ten years. The limitation period starts from the date the receivable becomes due. The due date of receivables is regulated according to TCC Article 1427. In case of loss insurance, it becomes due after the risk occurs, after the documents related to the risk are submitted to the insurer, after the insurer's investigations are completed, and in any case, forty-five days after the notification of the occurrence of the risk. Unlike loss insurance, life insurance becomes due after fifteen days. All claims arising from the insurance contract may be claimed within the statute of limitations. Contract provisions changing these periods are invalid.

In this article, we talked about insurance. You can also send any questions you want to ask about the subject to our office in the comments section.

Av. Mehmet Yücesoy

İzmir Attorney & Legal Consultancy