Though some may find insurance to be a nuisance, many people realize its value and spend time, energy and money making sure their family's financial situation is properly protected by the right insurance plan. After you work so hard to find the right policies, you want to minimize the chances of losing them. Insurers must follow state laws regarding how and when they can cancel policies.
Governed by States
Each state regulates its own insurance industry, and therefore how an insurer must give notice of cancellation in one state may differ in another. Additionally, the rules may differ depending on the type of insurance involved. While property and casualty insurance plans like auto, commercial and homeowners policies are all generally governed the same way, the state may treat life, health, disability and other non-property insurance policies differently. Visit your state's department of insurance website for state-specific details.
Nonpayment of Premium
Generally, the insurer is always allowed to cancel your policy when you fail to pay your premium. As it is impossible to know ahead of time whether you will provide adequate payment, these notices of cancellation arrive after the policy has lapsed. However, you should receive a bill or other notice of premium due that includes a policy cancellation date if you don't pay, so this would serve as your advance notice of cancellation in this circumstance.
Most states permit their insurers to investigate newly issued policies for a certain period of time and either modify or cancel those policies at their discretion. If the insurer decides to cancel your policy within the state's permitted time frame, you should receive a notice of cancellation at least the mandatory number of days before the policy cancels. Many states require 20 days' notice at a minimum. If your insurer does not cancel your policy within this time, they are generally forbidden from doing so through the rest of the policy period, except for circumstances permitted by state law such as misrepresentation on your application.
Some states require insurers to specifically state their reasons for cancellation, and others don't. Some states require the insurer to tell you its reason if you ask. Regardless of what information the notice of cancellation must contain, the insurer must deliver the notice to you in a way the state permits. The most common way they do this is by letter delivered through the postal system. The insurer may also hand-deliver the notice, or send it through certified mail, but many states do not require this as long as the insurer obtains a proof of mailing notice from the post office.
- Massachusetts Office of Consumer Affairs & Business Regulation: Frequently Asked Questions on Auto Insurance
- State of Rhode Island Division of Insurance: Commercial Insurance Cancellation, Non-Renewal and Premium or Coverage Changes
- Connecticut Office of Legislative Research: Notification of Group Health Care Plan Change
- Car Insurance: Does an Insurance Company Have to Notify You a Certain Amount of Time Before the Current Policy Expires if They Plan to Deny Renewal?
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