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5 reasons why an insurer may cancel your policy
Avoid some common mistakes that could result in your insurance cover being cancelled.
The purpose of insurance cover is to help you deal with unexpected events such as a house fire, theft, a car accident, loss of life, loss of income and other disasters. There’s a lot you need to understand about insurance for your own peace of mind, so you can be confident that you or your business remain covered against all potential risks.
For example, did you know that there are certain conditions under which an insurance provider can cancel your policy? Remember, an insurance policy is a legal agreement. If any of the conditions aren’t met by either party, that will be considered a breach of contract and the other party has the right to cancel it.
Insurance cancellation
Cancellation means that your policy is terminated. If you aren’t happy with your current policy, or you want to change insurance providers for any reason, simply speak to your insurer about how to cancel it, subject to the terms and conditions (T&Cs).
If your insurer decides to cancel your policy, on the other hand, they will usually give you 31 days’ notice before the cancellation. However, your policy can be cancelled without notice in the case of fraud or dishonesty.
Here are 5 common reasons why an insurance company might cancel a policy:
1. Non-payment of premiums
This is the most common reason for policy cancellation. You must pay your premiums on time and in full to remain covered. Most insurers offer a grace period, which can be up to 30 days from the due date. If you catch up on your payments during that time, your policy will stay active. If not, your policy will lapse. However, your provider must also notify you in writing that they didn’t receive your payment within 15 days of the due date.
2. Dishonesty
Insurance operates on the principle of good faith by both the insurer and the insured. An insurance provider calculates your premiums based on the insured amount and your risk profile, which is determined by the information you provide. You must always be honest, whether filling in your policy application or submitting a claim. Any misrepresentation or dishonesty is a breach of the insurance contract and can result in claims being denied and your policy being cancelled.
3. Non-compliance with the T&Cs
Every insurance policy contains T&Cs, and insurance only covers you for losses that occur while you’re abiding by them. If you are in breach of the T&Cs, the insurer can reject your claim or cancel your policy.
Increased risk could lead to you making excessive claims, which is another reason a policy could be cancelled
T&Cs can differ depending on the type of insurance cover or the specific provider. That makes it essential that you read and understand the T&Cs before you take out any form of insurance. If there’s any wording you don’t understand, ask the insurer to clarify what it means.
T&Cs such as providing truthful information and paying your premiums on time are common across all insurance policies, but some conditions may only apply to specific types of cover. With vehicle insurance, for example, there are some common T&Cs to be aware of:
4. Driving without a licence
You must have a valid driving licence to apply for a vehicle insurance policy. If your licence is suspended or no longer valid, you must inform your insurer. You may have to change the regular driver named in the policy for it to remain valid, and your premiums will be aligned to their risk profile.
5. Changing your risk profile
Your risk profile has an impact on the amount of insurance you need and your premiums. Report changes in your risk profile to your insurer so that your premiums can be adjusted when necessary. If you were a non-smoker when you took out medical or life insurance but later started smoking, to use an obvious example, your policy would need to be adjusted.
But vehicle insurance is most often the area in which people forget to report a change in their risk profile. If, say, you take out the policy when your car is kept in a locked garage at home, but then move to a place that offers only street parking outside your residence, your risk will increase. The same applies if you were working from home when you took out the policy, and then you started driving to and from work at an office every day.
If your insurer learns that your risk profile has changed and they haven’t been informed, they can cancel your policy. Increased risk could lead to you making excessive claims, which is another reason a policy could be cancelled.
Remember, paying your premiums on time and being honest are the secret to a long and satisfactory relationship with your insurer. If you keep them informed of any changes that alter your risk profile, they can ensure you have all the cover you need at an affordable premium, and you won’t have any worries that your policy might be cancelled.
