Relax, this isn’t going to be an article about cancel culture. I promise not to go there. Instead, let’s talk about a different type of cancellation — that being from your insurance company. Can an insurance company cancel your insurance policy or non-renew it at any time? What rights do you have if you receive the breakup letter in the mail? What can you do if you still love them and they don’t love you?
An insurance policy is a contract between you and the insurance company. I’m not an attorney, so without going into the details or specifics about contracts, let’s just look at it like it’s a simple deal. This deal says you agree to pay some money, and in exchange, if something occurs, the insurer agrees to pay you some money. At its most fundamental level, that’s what we’re agreeing to when we purchase an insurance product.
So moving along, you have made this purchase, or agreement, with an insurance company. And then one day you check your mailbox. OK, fine, you check your email. And you find this:
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Dear You,
RE: Notice of Non-Renewal of Insurance Policy No. 1234
We regret to inform you that your insurance policy, number 1234 with Your Insurance Company, will not be renewed upon its expiration. This decision is in accordance with the terms and conditions of your policy and is based on the following reason(s):
- Reason for Non-Renewal: e.g., change in underwriting criteria, increased risk profile, non-compliance with policy terms, etc.
In compliance with California Insurance Code Section 678.1, we are providing you with this notice at least 60 days prior to the expiration date of your current policy. This will allow you adequate time to secure alternative insurance coverage.
The insurance company is breaking up with you! This is a sample of what your non-renewal letter may look like. It will usually provide your information, the insurer’s information and the state law requiring the notification. So that’s it? Nothing left to do? Well, not entirely.
Renewing your commitment
First, understand that insurance policies renew. This means that every year (for annual policies), both you and the insurance company get the opportunity to renew your vows. Meaning you get to shop around, see if you want to keep your policy or get another, and the insurer gets to decide if it wants to continue working with you. Turns out, state laws do vary, and you will have more flexibility than the insurer will. In this case, the company has decided for some reason not to continue insuring you.
But what if the reason you’re provided is something you can control? Perhaps the company is saying it cannot insure you because you have recently put in a pool and it is unfenced? Or maybe a large tree has had a growth spurt and now hangs traitorously over your roof? If it is something you are ready, willing and able to fix, then by all means, fix it. However, at this point, you are on notice from the insurer. It’s outta here, so if you plan to take actions, then you need to immediately — as in yesterday — let the insurance company know.
The moment you receive a letter like this, reach out to your insurer or agent or broker and tell them your intentions. Tell them you plan to remediate the issues that are causing your policy to be non-renewed. Time is of the essence here. Don’t just do the work and then, the day before your policy cancels, expect to pick up the phone and say, “Hey, y’all, we’re good, we’re cool. I fixed everything,” and have it matter. You need to tell the insurance company what you plan to do and follow up with proof of what you actually did do.
Don’t leave things until the last minute
Also, be sure that you get the work and the proof to the insurer well before the stated non-renewal date. Hey, we all have our computers to contend with, and insurance companies are not immune to the fussiness they can present. Once your policy is marked “to be canceled,” it takes time to change that status, and, gasp, a human being has to — wait for it — look at your proof of the work done and approve it, too. All of this takes time. Do not wait, do not pass Go, do not collect $200.
Try to remember this mantra if you receive a non-renewal notice: SCORE.
S = Speak with your agent/broker or insurance company
C = Confirm work that you are going to get done
O = Offer to do the work
R = Receive proof of the work done
E = Ensure the insurance company has this proof
I like to get things in writing — it tends to keep people honest (not saying by default this isn’t true). If you have it in writing, though, let’s simply say that people are less able to forget things they stated.
Now, remember not all non-renewals will provide a reason you can fix. Sometimes items required are simply not reasonable or possible for you to get done, in which case the countdown clock is ticking, and you should be jumping on the computer and/or leaving no stone unturned to find a new insurer to provide coverage for you.
Related Content
-
Time to Spring-Clean Your Finances: A Financial Professional's Four Steps to Tidy Them UpA midyear review of everything from spending to saving, with adjustments as needed, can set you on track to financial security. Plus, don't forget to check in on your workplace benefits.
-
Why a Law Firm Secretly Recording Client Conversations Is Wrong (and Illegal)A law firm that has been recording client conversations without the clients' knowledge or permission and has threatened employees if they speak out faces legal and ethical challenges.
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Think a Repeal of the Estate Tax Wouldn't Affect You? WrongThe wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
In Your 50s? We Need to Talk About Long-Term CareMany people don't like thinking about long-term care, but most people will need it. This financial professional recommends planning for these costs as early as possible to avoid stress later.
-
Social Security Pop Quiz: Are You Among the 89% of Americans Who'd Fail?Shockingly few people have any clue what their Social Security benefits could be. This financial adviser notes it's essential to understand that info and when it might be best to access your benefits.
-
Such Attractive Yields in High-Grade Munis Are Rare and May Not Last LongAccording to this munis expert, the last time munis were this cheap was a brief period in 2023. If you kicked yourself for missing out then, you have a second chance now.
-
Financial Analyst Sees a Bright Present for Municipal Bond InvestorsHigh-tax-bracket investors have an excellent opportunity to secure low-volatility, high-quality returns at yield levels rarely seen in over a decade.
