Most Americans carry some type of insurance on their cars, homes, and even themselves. There are multiple kinds of insurance available to consumers, each with different features, benefits, and obligations.
In most states, an insurance company must give a policyholder written notice of cancellation at least 30 days before canceling the policy. The policy contract specifies the reasons the insurer can cancel the policy and the time frame and method in which it can do it. Being at risk of losing your insurance can be frightening and a financial burden, but there are ways to communicate and negotiate with your insurance company should this occur.
Rights of the Insured
Once an insurance policy is issued, an insurance company cannot cancel the policy except for reasons specifically stated in the policy. State laws usually limit what an insurance company can include as reasons for the cancellation of the policy. It is important to read all insurance policies carefully and ask your insurance agent to provide you with answers if you have any questions. A 2018 survey done by Insurance.com found that nearly one-fourth of polled homeowners stated they did not read their policies, which could leave them open for problems down the road.
Each state has an insurance commission or division charged with protecting consumers while encouraging a financially stable and competitive insurance marketplace. State insurance regulators confirm whether insurance companies are financially sound/solvent and can pay claims. They also strive to ensure that insurance companies treat policyholders and insureds fairly, handle their claims promptly and accurately, and honor the policies. The National Association of Insurance Commissioners (NAIC) is a great resource and lists each state commission's office.
- There are different types of insurance policies available to consumers, and each may have different provisions for cancellation.
- States typically require insurance companies to provide a 30-day notice of cancellation to the policyholder before the cancellation date.
- State insurance commissions are formed to protect the consumer and ensure that insurance companies are solvent and honor their promises, such as paying claims.
- Negotiating with the insurance company can stop a cancellation.
Reasons for Cancellation
Policy contracts contain the provisions of the policy, including reasons for cancellation. Some common reasons include:
- Intentional damage to a covered asset by the insured, policyholder, or interested third-party
- Criminal record
- Insured poses a "moral risk"
- Life changes
- Too many missed payments
- Too many claims
- Significant changes in risk.
Ways to Negotiate
It is worth a call to your insurance company to try to halt the cancellation by providing a satisfactory solution to the complaints made by the company. First, make sure the information in your file is up to date and accurate. Review the complaint and come up with several possible solutions. For example, if your homeowner's insurance is being canceled due to too many claims for water damage, ask if you can remove coverage for water damage from your policy going forward, or ask if they have another policy that does not cover water damage.
The Bottom Line
An insurance company has the right to cancel your policy if you do not fulfill your obligations under the policy agreement. However, by using resources like the NAIC, which can offer free advice and services to policyholders, and trying to negotiate with your insurance company, it may be possible to keep your insurance.