Receiving a letter from the insurance company concerning the status of your policy may make you a bit tense. Yet, before you get worried, you must understand the difference between a cancellation of your policy and a nonrenewal. These terms are vastly different and require different responses on your part.
A policy nonrenewal occurs after the insurance company or you, as the insured, decide not to renew your policy when it expires.
If your insurance company decides not to renew, they must give you adequate notice based on the laws established in your state, and must outline the reasons as to why they have chosen not to renew your policy for another year. If you think their reasoning is unjust, you may call the insurer for more explanation. Here are some reasons why your policy may not be renewed:
- The insurer no longer carries that particular line of coverage.
- The insurer decided to write fewer policies under that specific line of coverage in your area.
- You committed an act that raised the insurer’s risks significantly. That usually means that you filed too many claims during a policy period. Obtaining a new policy after a nonrenewal is typically not a difficult process. Your premiums may be slightly higher but you will be better off as compared to having your policy cancelled.
The insurance company cannot cancel your policy if it has been in effect for more than 60 days except under the following conditions:
- You did not pay your premium.
- You have committed fraud.
- You have made serious misrepresentations about yourself on your application. If your policy is going to be cancelled, you will receive notice well in advance. After a cancellation, it can be difficult to obtain a new policy, as other companies may see you as an undesirable risk.
If you do receive a cancellation notice because you failed to pay your premium, you may be able to resurrect your policy with the insurer by paying for an entire year’s worth of premiums upfront. If that is not an option for you, then you may have to opt for a high-risk policy.