Learning of an insurance cancellation can be an alarming experience. It is important to remember that in the vast majority of situations, there are other options available. Here are some of the reasons why insurance policies cancel, and advice on next steps.
Timing and Reminders
Timing and reminders before the insurance cancellation vary depending on the insurance agency, the insurance company, and whether the cancellation occurs mid-term or on renewal. It is more difficult for an insurance company to cancel mid-term, so additional notices, and additional time, are typically provided. Some insurance companies and agencies will provide several notices before cancelling, while others provide fewer. At least one advance should be provided. Typically the insurance company will provide notice over mail, or email if on paperless. Insurance agencies should take it a step further and provide notice by text and phone as well.
Non-Payment
If insurance premiums are not paid on time, it will lead to a cancellation. Sometimes notice is sent before the cancellation date, giving the insured time to make payment before the cancellation date, while other times notice is sent after the cancellation date, allowing the insured to pay to reinstate the policy. There is a limited time to reinstate. Sometimes the reinstatement date is the cancellation date, and there is no lapse in coverage, while other times the reinstatement date is the date the payment is made, leaving a lapse in coverage.
Non-Compliance
If insurance requirements are not met, it could lead to a insurance cancellation. These requirements could include:
- Signing required documentation.
- Providing information requested by underwriting.
- Complying with insurance audit requirements (business insurance).
- Complying with insurance inspection requirements (home insurance, business insurance).
Underwriting Guideline Changes
All insurance companies have underwriting guidelines that determine eligibility. These guidelines can change depending on the insurance company’s financial position and assessment of risk. This can lead to certain policies being non-renewed (cancellation upon renewal).
Insurance Company Exit
Instead of changing underwriting guidelines, an insurance company may decide to completely exit certain types of insurance in certain states. State regulations can influence the decision to exit.
Customer Request
Insurance policies can be cancelled upon request. Sometimes a signed written request is required, while other times an email or verbal request is sufficient.
Refunds
When an insurance policy is cancelled, refunds are distributed as follows:
- Prorated – All unused insurance premium is refunded. This is most common.
- Short-rate – Refund is reduced by a predetermined cancellation penalty fee.
- Fully earned fees – If fees are charged, these are often “fully earned” and therefore nonrefundable.
- Minimum earned premium – A certain percentage of premium is retained, regardless of the cancellation date. Most common is a 25% minimum earned premium, which means the first three months of premium is retained. After that, the refund is prorated. This is common with business insurance policies.
Poor insurance cancellation experience? Contact Chris Elliott Insurance Agency!
Our Seattle insurance agency has processes in place to notify customers of pending insurance cancellations in advance, and if the policy does cancel, we can almost always find alternative coverage. Contact our team today!
