Insurance companies cannot cancel your policy without good reason. However, there are a few ways that could lead to the cancellation of your policy. These are the top five reasons that would mean canceling your policy.
1. The delay in payments
“The first and most obvious reason for canceling your policy would be non-payment or late payment,” says Pete Moraga, spokesman for the Insurance Information Network of California. This applies to any type of insurance.
Each state has rules that govern when an insurance company may cancel your policy. Grace periods will also vary depending on the type of insurance you buy (health, auto, home, life) and the insurance company you choose.
Some mobile auto insurance companies may seize the opportunity to cancel your policy if you are only a few days late in payment – especially if you are a regular latecomer. However, many insurance companies value your membership and will not expel you if you are only a few days late in paying your policy.
The best advice is to always pay your bills on time. This generally means that the premium must be received before the due date. Mailing the payment by mail on the due date may not be enough. If you are concerned about late payments, check with your insurance company about your grace period.
If you have been canceled by your car insurance company, you may be required to pay the amount owed before reinstating your insurance. For more information, read about the consequences of late payments on your car insurance policy.
2. Hiding the truth
Your insurance company reserves the right to cancel your policy if you are wrong.
“It is considered a serious problem,” says Moraga. For an insurance company, it would not be a fair deal if you get a cheaper policy through lies. For example, lying to your insurance company about the number of miles you drive per year could be grounds for cancellation, Moraga says. Some insurers may only increase their rates on car insurance for this particular lie, but they may also cancel your policy and refuse to pay any claims made by you – assuming you provided inaccurate information on purpose. Cheating about the number of kilometers driven is one of the top 5 lies that can be told to car insurance companies.
Life insurance companies can also cancel your policy if you lie to them. For example, if you lie about your hobby of deep-sea diving and then die during a dive, your life insurance company could deny your beneficiaries compensation. Any lie or concealment of the truth found within a policy’s two-year challengeable period may result in the insurer reducing death benefits or even canceling the policy, depending on state law. When applying for any type of insurance, the use of the truth is your best weapon.
3. Your driver’s license has been suspended or revoked during the policy period
If your auto insurance company learns that your license has been suspended or revoked, it will cancel your policy. This rule also applies to other members of your family. For example, if you have a child listed on your policy and your license has been revoked or suspended, your insurance company may cancel your policy if you do not disclose this information. Car insurance companies will often review your DMV record (and that of other members of your family) at the time of renewal. They will also learn of a license suspension if the person in question has been involved in a car accident. Therefore, if anyone in your family has had a problem with your license, notify your insurance company. Your insurance policy will not be canceled (unless you have been found guilty). Your insurance company can simply exclude coverage for that person.
4. You ignore phone calls from your insurance company
Ignoring your insurance company is never a good idea. If your insurance company makes an effort to communicate with you – especially in a claims process – you are bound to be sympathetic. For example, if you are involved in a car accident, your insurance company will probably want to interview you or you may even have to attend to testify if it is a lawsuit. Non-compliance may be grounds for canceling your policy. A standard auto insurance policy states that the insurer “has no obligation to provide coverage” unless the insured is in full compliance with several powers. These include promptly notifying your insurance company where, when, and how an accident occurred. A standard insurance policy states that “a person seeking coverage must cooperate with us in the investigation, resolution or defense of any claim or lawsuit” and “without delay send us copies of any legal notices or documents received in connection with the accident or loss.” This can include exams and medical records.
5. You commit suicide
In general, life insurance policies have a free competition clause that says, among other things, that the policy will not cover suicide in the first two years of the contract. However, if suicide occurs two years later and one day after purchasing the policy, your beneficiaries will be entitled to compensation.