Question

Moi High School had covered their school property under fire insurance for a period of five years. Their policy was terminated at maturity. Explain five circumstances which could have led to the termination of the contract.

Answer 1

1. Non-payment of premiums: If the school fails to pay the insurance premiums within the stipulated timeframe, the insurance company may terminate the policy. Insurance policies require regular premium payments to remain in force, and non-payment can result in cancellation or termination.
2. Policy expiration: The policy might have a fixed term, typically five years in this case, and when that term ends, the policy is considered terminated. If the school does not renew the policy or arrange for a new policy before the expiration date, the contract will come to an end.
3. Material misrepresentation: If the school provided inaccurate or false information during the application process or failed to disclose important details about the property, it could be grounds for termination. Insurance policies require honest and complete disclosure, and any misrepresentation can lead to the termination of the contract.
4. Change in property use or risk profile: If the school undergoes significant changes in the way the property is used or if there are modifications made to the property that increase the risk of fire, the insurance company may decide to terminate the policy. For example, if the school converts part of the property into a high-risk facility without notifying the insurer, they may terminate the contract.
5. Fraudulent activities: If the school engages in fraudulent activities or intentionally causes fires to collect insurance payouts, the insurance company can terminate the policy. Insurance policies have provisions to protect against fraudulent claims, and any evidence of such activities can lead to immediate termination.