While some people may find insurance a nuisance, many people recognize its value and spend time, energy, and money making sure their family’s financial situation is adequately protected by the right insurance plan. After working hard to find the right policies, you want to minimize the likelihood of losing them. Insurers must comply with state law on how and when they can cancel contracts.
Managed by nations.
Each state regulates its own insurance industry, and therefore the way an insurer must announce a cancellation in one state may be different in another. In addition, the rules may vary depending on the type of insurance involved. Although property and accident insurance plans such as auto, commercial, and homeowner policies are often tailored in the same way, states can treat other life, health, disability, and non-property insurance policies differently. Visit your state’s insurance department’s website for state specifics.
In general, the insurance company is always allowed to cancel your policy when you are not paying your premium. Since it is impossible to know in advance whether you will provide enough payments, these cancellation notices will come after the policy expires. However, you will receive an invoice or other premium notice including the cancellation date if you do not pay, so this will be a prior notice of your cancellation in this case.
Most states allow their insurers to investigate new policies enacted for a certain period of time and modify or cancel those policies at their discretion. If the insurance company decides to cancel your policy within the state’s allowable time frame, you will receive a cancellation notice of at least the required number of days before the cancellation. Many states require at least 20 days’ notice. If your insurance company does not cancel your policy during this time, they are generally prohibited from doing so for the remainder of the contract, except in cases permitted by state law, such as misrepresentation in your application.
Some states require insurers to specify the reasons for canceling their contracts, and others do not. Some states require insurers to tell you their reasons if you ask. Regardless of what information the cancellation notice must have, the insurance company must send you the notice in the manner permitted by the state. The most common way they do it is to send a letter through the postal system. Insurers can also send notifications by hand or by letter of guarantee, but many states do not require this as long as the insurer has evidence of sending notices from the post.