Cover note is the name used to describe the temporal insurance cover extended to the proposer by the insurer during the interim period between submission of the proposal form and its formal acceptance or rejection.
• It is a legally binding contract between the parties. It may be a formal agreement or a letter from the company stating that cover has been extended. If loss arises during the currency of the cover note the insured generally recovers as if he had a policy in force or in accordance with the terms of the cover note. It is generally effective for 30 days.
• In Juliet Praet V. HG Polland Ltd, Pearson J observed that cover note “covers the assured and posts the undertakers on risk for the period while the proposal is being considered and until a policy is either granted or refused. The assured is therefore entitled to enforce the contract contained in the cover note provided he has complied with its conditions, such as payment of the premium.
• Issuance of a cover note may be justified on the following grounds:
o It is argued that the insurance industry is formal and certain stages have to be followed before a policy is issued.
o It extends immediate over to the proposer.
o It affords the insurers sufficient time to access the risk.