There could be many reasons why an insurance company might cancel someone’s policy. Here’s what you need to know about an insurance policy cancellation or why your policy could be cancelled.
By knowing the potential reasons, you can avoid them from happening to you. Here are the top few reasons why an insurance company might decide to cancel your coverage:
Top 3 Reasons an Insurance Company Could Cancel Your Policy
- You neglected to pay your premium. Non-payment is the usual reason insurance companies will cancel a policy. Just like any other service, not making payments can result in loss of that service.
- Under your current policy, you are no longer eligible for that coverage. Often this may be out of your control, such as if you no longer meet the eligibility criteria set out by the insurance company. For example, if the company decides to change what types of dwellings they are willing to insure, this could make you ineligible under their new guidelines. Or, it could be caused by your own behavior. For example, major traffic violations, such as drunk driving, that cause you to lose your driver’s license could prompt your insurer to cancel your policy.
- You failed to inform your insurance company of an important change. A “material change in risk” is a change that would affect your eligibility for coverage or change the kind of coverage you need. For example, if you decide to leave home to travel for a year and you rent out your home during your absence, then that is a material change in risk. It is no longer your residence but a rental property. If you don’t advise your insurance company of this change, any claim could be denied and your policy cancelled.
What Can Happen If Your Insurance Policy Is Cancelled?
If your insurance policy is cancelled, or the insurance company decides not to renew your policy, you could be left with no coverage until you find a new insurance company to insure you.
If you leave yourself without coverage, this could affect any loans you may have, such as a mortgage or car loan. Having insurance coverage is normally a condition of financing.
Losing coverage could even prevent you from driving since it is illegal to drive a car with no insurance.
If your policy is cancelled it may make it more difficult for you to find a new insurance company that is willing to give you coverage. It will cost you more money.
Tips to Prevent an Insurance Policy From Being Cancelled By:
- Paying your premium on time.
- Giving your insurance broker and company all the correct and honest information when you apply and/or renew coverage.
- Informing your insurance broker promptly of any changes in your situation that could affect your insurance coverages.
Call your broker whenever you have questions or need to make any changes to your policies. Your broker can also guide you through the process of securing new insurance if you have already had a cancellation or if your current policy is not being renewed by your insurance company.