The Difference between Cancelation and Non-renewal

May 2, 2021 | Business Insurance, Personal Insurance

Insurance nowadays is a necessity more than a luxury for all human beings. No living creatures may they be animals, plants, mountains, nor oceans need security as man does. We are afraid of uncertainty, fear, and death but in reality, everyone will die one day. There are things in this world that are beyond our control and it’s just a matter of time before its occurrence. 

Therefore, being insured plays a very important role in overcoming this problem. To give a wider view and better understanding, there are different kinds of insurances that most of us are probably not familiar with. Insurance is categorized based on hazards, risks, and types. There are several types of insurance depending on your needs, as time passes by you may want to check what insurance you have and don’t have, then decide if you want to keep it or cancel it.

What is Cancelation and Non-Renewal of Policy?

Now if you are about to avail one of the many types of insurance, you also need to familiarize yourself with the terms like cancelation and non-renewal of the policy because it sometimes creates confusion to the policyholders, or some think that it’s the same thing but no. An insurance company canceling a policy and choosing not to renew it is entirely different from each other. 

The biggest difference between non-renewal and cancelation of an insurance policy is that if your insurance company cancels an insurance policy, your insurance score will be compromised. When you are looking for a new car insurance policy, not renewing the policy will not harm you, but cancelation of the policy due to non-payment or fraud may make it difficult to find a new policy at an affordable price. 

For example, in most states, auto insurance is a legal requirement, but in various situations, the insurance provider can cancel your insurance or refuse to renew your contract. If the insurance company accidentally cancels your policy, you must use one of the following two methods to cancel or cancel the renewal. This is the difference between these two results that you need to understand. After the policy is held for 60 to 90 days, if you violate the terms and conditions of the contract and agreement signed by both parties at the beginning of the sale, the insurance provider reserves the right to cancel the service. 

There are certain ways for the insured to breach the contract and cancel the insurance. Here are three of the most common situations:

  • Fraud. If you lie about something on the app, like your past driving history or the number of vehicles, the insurance company reserves the right to cancel the policy. 
  • License suspension. Regardless of the reason, for any insurance company, the revocation or suspension of your license is a major red flag, indicating that you are a high-risk customer. If your license is suspended due to a major traffic violation, your insurance company may cancel your existing insurance policy. 
  • Non-payment. Although some irregular late payments can be forgiven, insurance companies that face recurring payment problems and repeatedly ignore late payment warnings may decide to cancel the link and cancel the policy. If a large insurance company shuts you out, it will be difficult to find another insurance provider because they all use similar parameters to determine customer eligibility. In addition, due to your cancelation, your premium and the monthly payment will increase so you should expect to pay more to get the same level of coverage as before. 

To explain non-renewal, it’s when your insurance policy expires, both you and your insurer reserve the right to refuse to renew the existing policy. If this happens, your insurance must give you an appropriate number of notices. The specific number is clearly stated in the contract, giving you plenty of time to find a new insurance company without facing delays in coverage. The existing policy was renewed for a variety of reasons unrelated to your actions as a customer (for example, your particular plan has been canceled). But in some cases, it may depend on your behavior, such as repeated payments or increased risk of harmful accidents. 

Although not renewing the insurance policy is not as serious as the termination of the contract, and does not always lead to the termination of the contract. With higher premiums or monthly bills, it’s important to keep up-to-date with your insurance provider to ensure that you become a model customer and get the most out of your plan. Regardless of the reason why your policy is canceled or not renewed, your insurance provider must provide you with the reasons behind that action. If you have not been notified by phone or email, please contact them to find out the reason for the termination of your policy and, where applicable, negotiate a solution to the situation. 

When Not to Renew Your Insurance?

This would vary on the type of insurance you are planning to end. You would not need car insurance if you don’t have a car or do not plan on driving for a long period of time. Some people would not care to renew their life insurance if they are confident that they can suffice and support their whole lives on their own. As a necessity, depending on your need, insurance should always be there and you should avail one to cater to your lifestyle or even your business. It would always be wise to check and review your insurance policies and re-evaluate aspects of your living, this could not only help you maximize other types of insurance and explore other cheaper insurance companies but could also help you save more than what you are saving now.

Finding a cheaper and more suitable (for your needs) insurance policy and the agency is always the best way to make the most out of insurance, and when the time comes that you decide that you want to switch insurance agencies — this is also the best time to not renew your insurance. But it is also a decent practice to let your previous agency know that you are letting them go as thanks to the service they have provided you for the number of years you were with them.

Why Should I Avoid Policy cancelations?

Canceled insurance policies are recorded and considered as red flags by insurance agencies. Some insurance companies cannot deny you the service, but once they see a cancelation record under your name it may cost a lot higher than your previous insurance. Policy cancelations can trigger insurance companies to tag you as high-risk and this could get your insurance premiums more expensive than the others. This is the sole reason why one should avoid having their insurances canceled. One may think that they got away with it and could switch to a cheaper insurance agency, but this is recorded and could cost you a lot more.

These cancelations can be reinstated if you do decide to continue paying for it and realize that it is something worth investing in. Some insurance agencies are open to reinstating your account, though there would be some considerations and to do’s:

  • Take note of how long your policy has lapsed. Some insurance agencies allow only 30 days or less to reinstate a lapsed policy. Better to call your insurance company as soon as you decide to reinstate your account.
  • Have a new medical exam. For life insurance, this is a must and agencies would require you to retake a medical exam since there might be changes in your health condition from the time your policy lapsed to the time you want it to be active again.
  • Be prepared for fees. Insurance agencies will require you to pay off all your premiums from the time that your policy went into the ‘grace period’. There may be fees or penalties depending on the insurance agency and your policy, but expect a pretty big amount if the policy has lapsed for years.

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