Termination of an insurance contract limits the obligations of the parties thereto. Insurance contracts may come to an end or terminate in the following ways:
  1. Payment of the sum assured or total indemnity when risk attaches – in property insurance, total indemnity discharges the contract while in non-indemnity contracts, payment of the sum assured when risk attaches or on maturity discharges the contract. Reinstatement fro partial loss does not terminate the contract.
  2. Agreement or mutual consent – parties by mutual consent may at any time agree to cancel the policy thereby terminating the contract. The parties’ mind must be at Idem.

Reyner Vs Hall
[1813] 4 Lloyds Rep. 12
In life insurance the insured is entitled to the surrender value of the policy. Under section 89 of the Insurance Act, if an insured surrenders a policy to the insurer, he is entitled to a partial reimbursement of up to 2/3 of the total premiums paid inclusive of interest and bonuses payable provided he has been a bona fide insured fro at least 3 years.

In indemnity contracts, surrender of the policy before the end of the year, entitles the insured to its surrender value.

  1. Breach of warranty [conditions]-  an insurer may apply to the court for cancellation of an insurance policy for breach of a condition or warranty by the insured e.g. non-disclosure of material facts or misrepresentation of facts. In Jubilee Insurance Co Vs John Sematengo [1965] EA 233 The plaintiff Insurance Co. filed an action against the defendant for a declaration that the co. was entitled to avoid a motor insurance policy on the ground that the same had been obtained by non-disclosure of material facts and misrepresentation of facts.
The insured had inter alia failed to disclose the fact that the subject matter of the insurance had been involved in an accident the day before it was insured and that it had a major mechanical defect.

It was held that the insurance co. was entitled to avid the contract. In the words of Sir Udo Udoma
The plaintiff co. is entitled to the declaration sought because it has satisfactorily discharged the onus which is upon it of establishing by a preponderance of evidence that the insurance policy and the certificate were obtained by the defendant by the non-disclosure of material facts or by misrepresentation of facts which was false in some particular.”

1.    The Motor Union Insurance Co. Ltd Vs. A.K. Ddamba [1963] EA 271

  1. Operation of Law- an insurance contract terminates if circumstances render its sustainability impossible e.g. Liquidation or winding up of the insurer fro indemnity contract or sale or transfer of the subject matter. In;
Kinyanjui Vs South India Insurance Co. Ltd
[1968] EA 160
The plaintiff had obtained judgment under the Fatal Accidents Act, Cap 32 Law s of Kenya, against the driver and alleged owner of the bus. The insurance co disclaimed liability on the ground that though the alleged owner had taken out a policy, the bus was being operated by a company to which it had been transferred and hence the alleged owner had no insurance interest. It was held that since the company owned and operated the bus and had engaged its own driver, the company alone had an insurable interest in the bus. The transfer of the bus to the company terminated the insurance cover hence there was no cover at the time of the accident.

Peters Vs General Accident and Life Assurance Co. Ltd [1937] 4 ALL ER 628
  1. Lapse  [Effluxion of time] – indemnity contracts run for a year and on expiry of their duration unless renewed by mutual consent.


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