Commercial Insurance: A Guide to Insurance Claims, Exclusions, and Policy Termination

Based on 163 consultation cases · Updated October 4, 2026 · Translated from the Korean original.

Whether insurance benefits are payable depends not only on the circumstances of the incident but also on the type of insurance, the policy terms, compliance with the duty of disclosure, and the payment and notice procedures. Even if an insurer has denied a claim, an exclusion clause or policy termination is not necessarily valid in every case; the applicable legal standards and the terms of the policy must be considered together.

People involved → Insured person → Insurer → Injured person or claimant → An insurance claim is denied or a policy is terminated → Was a material fact withheld intentionally or through gross negligence? → Did the insurer demand premium payment within a reasonable period? → Does the exclusion fit the policy wording and the circumstances of the incident? → Yes — Article 651 → A possible basis exists validity and benefit liability need separate review → No → This ground alone may not support denial or termination → Yes — Article 650 paragraph 2 → Yes → Check disclosure and assess benefit liability separately → Was the undisclosed fact material and withheld intentionally or through gross negligence? → Check the payment demand and notice procedure → Was payment demanded within a reasonable period and were applicable termination requirements met? → Check the policy wording and incident detail…

Key points

Under certain conditions, an injured party under liability insurance may claim compensation directly from the insurer, and the insurer of a joint tortfeasor who has paid damages to the injured party may seek direct contribution from another insurer for that insurer’s share (Commercial Act, Article 724(2) (상법 제724조 제2항), Case 1).
Guarantee insurance may, in substance, have the character of a guarantee, but the guarantee insurer and the guarantor under the principal contract cannot automatically be treated as co-guarantors for purposes of applying the rules on recourse (Civil Act, Article 448 (민법 제448조), Case 2).
A policy clause providing that nonpayment of premiums alone automatically causes the policy to lapse without following any procedure may be invalid. The insurer must demand payment within a reasonable period, and a notice of termination given at the same time may also be valid if the applicable requirements are met (Commercial Act, Article 650(2) (상법 제650조 제2항), Article 663 (상법 제663조), Case 4).
To terminate a policy on the ground that the duty of disclosure was breached, it must be determined whether a material fact was not disclosed intentionally or through gross negligence. The policy may be terminated even if there is no causal connection between the insured event and the undisclosed fact, but the insurer’s liability to pay benefits must be assessed separately (Commercial Act, Article 651 (상법 제651조), Article 655 (상법 제655조), Cases 18 and 19).
Whether the suicide exclusion applies under life insurance depends on the specific circumstances, including whether the insured consciously ended their life of their own free will. The mere fact that the insured had a mental illness or was in an extreme mental state does not automatically determine the outcome (Cases 5 and 16).
A life insurance policy covering another person’s death requires the insured’s written consent when the policy is concluded. Without that consent, the policy may be void (Commercial Act, Article 731(1) (상법 제731조 제1항), Case 9).
An exclusion clause for unlicensed or drunk driving under accident insurance may be limited in its effect if it means that coverage is denied even when the accident was caused by negligence. However, the specific wording of the policy and the nature of the accident must be examined (Commercial Act, Article 732-2 (상법 제732조의2), Article 739 (상법 제739조), Article 663 (상법 제663조), Case 10).
The extent to which an insurer may exercise subrogation rights against a third party after paying benefits depends on the type of insurance and the relationship between the parties. The law provides an exception for claims against family members who share the insured’s livelihood, and the amended provision discussed in the case should also be checked (Commercial Act, Article 682 (상법 제682조), Cases 13 and 25).

Frequently asked questions

Q. If one insurer has paid the injured party in full, can it seek contribution from another insurer?

The insurers of joint tortfeasors who each hold insurance policies may be directly liable for the damages owed to the injured party. If one insurer pays the injured party and thereby discharges the obligation jointly, it may seek direct contribution from another insurer for that insurer’s share.

Case 1

Q. If I receive notice that my policy lapsed because I did not pay the premium, am I unable to receive insurance benefits?

A policy clause providing that nonpayment of premiums immediately causes the policy to lapse may be invalid because it conflicts with the Commercial Act. The insurer must demand payment within a reasonable period. Even where a notice of termination is given at the same time, the specific requirements, including the length of the demand period, must be examined.

Case 4, Case 14

Q. What happens if I settle with the at-fault party after receiving treatment for a traffic accident through national health insurance?

The National Health Insurance Service may acquire a right of recourse against the at-fault party to the extent of the benefits it paid. Accordingly, when settling, it is important to distinguish the benefits paid by the Service from the damages the injured party may claim, such as out-of-pocket expenses, and to check with the Service.

Case 3

Q. Can the insurer terminate my policy even if the undisclosed illness was unrelated to the cause of the accident?

If you intentionally or through gross negligence failed to disclose a material fact, the insurer may terminate the policy even if there is no causal connection between the accident and that fact. However, whether benefits are payable is assessed separately. The insurer may be liable to pay benefits if it is established that there was no causal connection between the insured event and the breach of the duty of disclosure.

Case 18, Case 19

Q. Are life insurance benefits unavailable if the insured dies by suicide?

Suicide may generally be a ground for exclusion, but a death occurring while the insured’s ability to make decisions freely was impaired may be treated differently from a case in which the insured intentionally caused their own death within the meaning of the policy. The specific circumstances, including any mental illness and the insured’s condition at the time of the incident, must be examined.

Case 5, Case 16, Case 17

Q. Can I take out life insurance on a family member without their consent?

A policy covering another person’s death requires the insured’s written consent when the policy is concluded. A policy concluded without consent may be void, so the consent procedure cannot be skipped merely because the insured is a family member.

Case 9

Q. Will accident insurance benefits always be denied if an accident occurs while I am driving without a license?

Benefits are not always denied merely because the policy contains an exclusion for unlicensed driving. A clause in accident insurance that denies coverage even when an accident was caused by negligence may be invalid, but it is necessary to examine whether the conduct is considered intentional and to review the policy terms.

Case 10, Case 11

Q. If the at-fault vehicle’s insurer claims that it is exempt from liability, can I also not claim under my uninsured motorist coverage?

Coverage under uninsured motorist insurance may apply even where the at-fault vehicle’s insurer’s liability has not been clearly established as a matter of law. The injured party’s insurer may first pay benefits in accordance with the policy. Whether a separate claim for contribution or restitution for unjust enrichment is available must be determined separately.

Case 25

Q. Will the limitation period expire if I delay making an insurance claim?

The limitation period for an insurance claim and the date from which it runs must be determined by examining the applicable law, the contract, and the date the insured event occurred. The period under the former Commercial Act cited in the case should not be applied automatically to a current matter. Even after the limitation period has expired, whether the insurer’s reliance on the limitation period constitutes an abuse of rights depends on exceptional circumstances.

Case 17

Relevant laws

Commercial Act, Article 638-3 (상법 제638조의3)
Commercial Act, Article 650(2) (상법 제650조 제2항)
Commercial Act, Article 651 (상법 제651조)
Commercial Act, Article 652(1) (상법 제652조 제1항)
Commercial Act, Article 655 (상법 제655조)
Commercial Act, Article 659(1) (상법 제659조 제1항)
Commercial Act, Article 662 (상법 제662조)
Commercial Act, Article 663 (상법 제663조)
Commercial Act, Article 682 (상법 제682조)
Commercial Act, Article 723 (상법 제723조)
Commercial Act, Article 724(2) (상법 제724조 제2항)
Commercial Act, Article 725 (상법 제725조)
Commercial Act, Article 726-2 (상법 제726조의2)
Commercial Act, Article 731(1) (상법 제731조 제1항)
Commercial Act, Article 732 (상법 제732조)

Watch out for

Statutory requirements and time limits may apply to policy termination. Check the content, timing, and delivery of any demand for unpaid premiums or notice concerning a breach of the duty of disclosure.
The limitation period for an insurance claim may differ under the former law cited in a case and the provisions currently in force. Check the law applicable to the policy and the date of the incident.
Whether benefits are payable is not determined solely by the exclusion wording in the policy. The type of insurance, circumstances of the incident, process by which the policy was concluded, and whether the policy terms were explained must also be considered.

Source cases

This guide was compiled by AI from the following Korea Legal Aid Corporation consultation cases (in Korean).

This guide is general legal information about Korean law, not legal advice for your situation. For a specific case, consult a lawyer or the Korea Legal Aid Corporation (call 132 in Korea).