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The last thing anyone ever wants to read on the top of a notice from their insurance company is “This policy has been canceled.” It’s not fun to receive the notice that your insurance company has decided not to renew your policy for some reason or another. While the terms “Cancellation” and “Non-renewal” may sound just about the same to the average person–in the world of insurance there is a huge difference.
Cancellation means that you or your insurance company decided to end all insurance coverage prior to the policy expiration date. Insurance Cancellation by the insurance company is like gum on the bottom of your shoe! On a hot day… Following the cancellation of an insurance policy by your insurance company it may be very difficult to find another insurance company willing to offer insurance.
If an insurance policy is lapsed and cancelled for nonpayment of the premium before the grace period ended some insurance companies may be willing to reinstate the insurance policy but most companies will only do so if a policyholder has an otherwise good record with the company. Many insurance companies will require the full policy premium payment in advance if there has been a history of late premium payments.
Insurance companies may refuse to offer insurance or will only offer high-risk insurance policies to previously canceled policyholders. Insurance cancellation indicates a policyholder is a bad risk. Insurance companies offer discounts to policyholders based on certain criteria and prior cancellation of an insurance policy is something an underwriter will review on new business. Many insurance companies ask prospective new business insurance applicants if they’ve been canceled within the last three to five years. Most insurance companies would rather not sell insurance to people who have a history of insurance cancellations.
In most states personal lines or property casualty insurance policies have a 60-underwriting review period where the insurance company can cancel the policy. Generally, when a policy is cancelled the insurance company will keep any earned premium and refund the unearned premium to the cancelled policyholder.
Non-renewal of an insurance policy is less restrictive and means an insurance company has refused to renew the insurance policy after the expiration date. Insurance companies are required to give policyholders written notice usually at least 30 days prior to the policy expiration date. Often the insurance company provides a reason and in many cases if the company’s request is correct the company will extend a renewal notice.
Non-renewal is like the nice mutual break-up after a fairly uneventful relationship, cancellation is like a nasty divorce.
If you receive a notice of non-renewal or cancellation from your insurance company the first step is to contact the agent or insurance company and ask if there is anything you can do to correct the situation. If that isn’t possible then you will need to shop for replacement insurance and should expect to pay a higher premium if your policy was cancelled.
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