Requirements for Cancelling an Insurance Contract - Explained
When and how can the Insurer cancel the policy?
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What is required to cancel an insurance contract?
An insured may terminate an insurance policy at any time. Generally, it requires that the insured express intent to cancel the policy. This may include notifying the insurer in writing or discontinuing payment of premiums. If the insured stops paying the insurance premiums, the insurer must provide the insured with notice of its intention to cancel the policy. If the insurer fails to provide notice within the statutory period, the insured may be able to resume her insurance contract by resuming payments. An insurer is generally limited by statute in its ability to cancel a policy.
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What are situation where an insurer can cancel an insurance contract?
Below are the common situations in which an insurer may cancel a policy.
Void by Insurer
An insurer may void a contract if the insured supplies false or misleading information to the insurer to obtain insurance. To void the contract, the insurer must demonstrate that the insured made a fraudulent or material misrepresentation. Further, the insurer must demonstrate that it would not have entered into the insurance relationship with the insured if it had known of the misrepresented facts.
Note: This right is limited by the incontestability period or clauses in the contract.
Conditions in Policy
An insurance policy may contain any number of conditions that can cause cancellation of the insurance policy. These are normally limited by state law and rules of equity.
Example: A professional liability or malpractice policy may contain a clause terminating a policy if a person loses a professional licensure.
End of Policy Term
An insurer may be able to terminate an insurance policy at the end of a stated insurance term. State law may limit the ability of the insurer to deny an insured the ability to renew a policy that has not lapsed. This is particularly true with health and life insurance policies.
Example: A term life insurance policy has a stated period during which the insurance provisions are effective.
How do you feel about the requirements for terminating an insurance policy? Why do you think the law places these limitations? Do you have an opinion regarding the above-listed situations allowing an insurer to cancel a policy?
ABC Corp holds an insurance policy with 123 Corp. ABC has made lots of claims in the past years and 123 is considering canceling the policy. What will 123 have to do procedurally to cancel the policy? What conditions provide 123 the ability to cancel the policy?
- Insurance Law (Intro)
- What is insurance?
- Captive Agent
- Independent Agent
- Captive Insurance Company
- Combined Ratio
- Claims Adjuster
- Capital at Risk
- Assigned Risk
- Incurred But Not Reported
- Qualified Actuary
- Cession (Re-Insurance)
- Burning Cost Ratio
- What is an insurance contract?
- Accidental Means
- Anti-stacking Provisions
- What is an insurable interest?
- What are the common categorizations of insurance?
- National Association of Insurance Commissioners
- Insurance Regulatory Information System
- American Academy of Actuaries Definition
- American Association of Insurance Services Definition
- American Council of Life Insurance Definition
- American Insurance Association Definition
- American Risk and Insurance Association Definition
- LLoyd's of London
- Associate in Insurance Services (AIS) Definition
- Associate in Loss Control Management Definition
- Associate in Marine Insurance Management Definition
- Associate in Personal Insurance Definition
- Associate in Reinsurance (ARe) Definition
- Associate in Risk Management Definition
- Associate in Commercial Underwriting Definition
- Associate in Insurance Accounting and Finance Definition
- Associate in Surplus Lines Insurance Definition
- Chartered Insurance Professional Definition
- Chartered Life Underwriter Definition
- Chartered Property Casualty Underwriter Definition
- Vehicle insurancePrivate Passenger Auto Insurance Risk Profile
- Underinsured Motorist Coverage
- Uninsured Motorist Coverage
- Omnibus Clause
- Health Maintenance Organization
- Capitated Contract
- Point of Service Plan
- Children's Health Insurance Program
- Disability Insurance?
- Credit Disability Insurance
- Life Insurance?
- Cash Surrender Value
- Absolute Beneficiary
- Acceleration Life Insurance
- Accelerated Benefit
- Accelerated Option
- Accelerative Endowment
- Charitable Gift Life Insurance
- Incontestability Clause
- Waterfall Concept
- Assumed Interest Rate
- Clean Sheeting
- Hazard Insurance
- Homeowners, Renters, and Fire Insurance?
- Participating Community (Flood Insurance)
- Insurance Considerations for Business
- Business Liability Insurance
- Commercial General Liability
- Liability Risk Retention Act
- Excess Insurance and Umbrella Insurance Policy
- Business Interruption Insurance
- Key Person Insurance Definition
- Own-Occupation Policy
- Self-Funded Health Insurance Plan
- Basket Retention Policy
- Commercial Blanket Bond
- Alternative Risk Transfer Market Definition
- Commercial Property Casualty Market Index Survey
- What are the primary obligations of the insurer?
- Earned Premium
- Reservation of Rights Letter
- Collateral Source Rule
- What are the primary obligations of the insured?
- Insurance Premium
- Affidavit of Loss
- What is the general structure of an insurance contract?
- Ambiguity Principle
- Accommodation Line
- What are the common disputed provisions in an insurance contract?
- Absolute Exclusion
- All Risks Clause
- What is required for the termination of an insurance contract?
- Risk Management
- Professional Risk Manager
- Associate in Management (AIM)
- Financial Risk Manager
- Forecasting (Business)
- Objective Probability
- Unconditional Probability
- Enterprise Risk Management (ERM)
- Operational Risk
- Business Recovery Risk
- Political Risk
- Asset Protection
- Performance Bond
- Barra Risk Factor Analysis Definition
- Above Ground Risk (Mining Industry)
- Bumbershoot Policy (Maritime)
- Abandonment Clause (Boat or Vessel)
- Bobtail Liability Insurance (Trucking Industry)
- Anti-Indemnity Statute (Construction)