Cancellation
Cancellation in insurance refers to the termination of an insurance policy before its scheduled expiration date. It can be initiated by either the insurance company or the policyholder, depending on the circumstances and terms outlined in the policy contract. Insurance policies may be canceled for various reasons:
- Non-payment: If the policyholder fails to pay premiums on time, the insurance company may cancel the policy for non-payment.
- Misrepresentation: If the policyholder provides false or misleading information during the application process, the insurer may cancel the policy based on misrepresentation.
- Underwriting reasons: The insurer may cancel a policy if they determine that the risk associated with insuring the policyholder has changed significantly or does not meet their underwriting guidelines.
- Mutual agreement: Policyholders and insurers may mutually agree to cancel a policy, often when circumstances change or coverage is no longer needed.
Upon cancellation, the insurance company typically refunds a prorated portion of the premium paid by the policyholder for the remaining coverage period, minus any applicable fees or charges specified in the policy terms. It’s important for policyholders to understand the cancellation provisions outlined in their insurance policies to avoid any misunderstandings or financial penalties.