Risk is an essential aspect of insurance, and we must bear in mind that insurance is designed to transfer risks to the insurer in exchange for a premium. In order for the insurer to validly insure the risk, it is necessary that all circumstances of the risk are disclosed by the insured prior to the issue of the policy.
Once the insurer has accepted the risk it seems logical that it cannot be increased during the period insured. Changes to the risk imply changes to the conditions of the original contract.
The Commerce Code prescribes that the insured is not allowed to alter the location or any other relevant circumstance that the insurer had used to evaluate the risk. In case the insured makes any changes without the insurer’s prior agreement, the insurer will be entitled to cancel the contract.
In addition to the above, the Commerce Code also determines that the insured must take care of the insured property with the diligence of a good family man.
If the risk is increased without the insurer’s prior consent and a loss occurs, the insurer will be at liberty to ask for the cancellation of the contract. However, such cancellation must be ordered by a judge after evaluating the evidence available.
Some learned authors understand that unsuitable maintenance of the insured property can automatically lead the insurer to reject coverage without the need to go to court to declare the cancellation of the contract.
Most fire insurance policies in Chile establish that coverage will be suspended if the risk is increased and the insurer is not notified of the new circumstances.
As per the above, the increase of the insured risk without agreement from insurers will lead to the declinature of coverage for the claim and possibly cancellation of the contract. The rule of average will not assist the insured in these situations.