Paragraph 6: Subject to general terms and conditions of the policy
The above paragraphs are subject to the general terms and conditions of the policy.
It is a fallacy to regard the Endorsement as terminated when there is a reduced sum insured still in force during the currency of the policy period. As mentioned earlier, this would tantamount to a breach of contract under paragraph 4, subparagraph (a). See illustration B above.
It is also a fallacy for the full sum insured (for example: RM2,000.00) to be reinstated to its original amount (RM2,000.00) when there is a balance of sum insured RM500.00) following a claim. Here, the reduced sum insured (RM500.00) is to be topped-up by the difference from the claim (or settlement) (RM1,500.00) to arrive at its reinstated sum insured (RM2,000.00).
Additionally, it is a fallacy to incur a full premium for reinstating the sum insured back to the original sum insured for the currency of the remaining policy period. The rate of premium is calculated on an annual basis. The norm is that a pro-rata calculation of premium is warranted for the reduced remaining policy period.