A:

In most states, an insurance company must give a policyholder written notice of at least 30 days before canceling a policy. The policy between the insurance company and the insured is a formal contract that specifies the reasons the insurer can cancel the policy and the time frame and method in which it can do it.

Rights for the Insured

Once an insurance policy is issued, an insurance company cannot cancel the policy except for reasons specifically stated in the policy. State laws usually limit what an insurance company can include as reasons for cancellation of the policy. Typical reasons include failure by the insured to make required premium payments, and suspension or revocation of the insured's driver's license, such as in the case of auto insurance. Other reasons include the insured misrepresenting the asset or committing fraud, and the insured intentionally damaging the asset, such as deliberately causing an automobile accident, damaging a physical asset and causing harm to himself in the case of life insurance or medical insurance. In some states, home insurance policies can be canceled for an excessive number of claims or for significant changes in risk.

Each state has an insurance commission or division charged with protecting consumers while encouraging a financially stable and competitive insurance marketplace. State insurance regulators confirm that insurance companies are financially sound so they can pay claims. They also provide services to policyholders to ensure they are treated fairly by making sure claims are handled promptly and accurately, and that insurance companies honor their policies. To find your state insurance commission visit the National Association of Insurance Commissioners (NAIC).

RELATED FAQS
  1. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
  2. Can your life insurance company sue you?

    Find out when life insurance companies have the right to recover claims. Learn about the most common reasons why a life insurance ... Read Answer >>
  3. How do I choose which insurance company to use?

    Picking an insurance company to use is not an easy task, considering the financial crisis of 2008 and 2009. Several financial ... Read Answer >>
  4. Which insurance policies do I really need?

    Your needs for insurance depend on your situation and can't be generalized for everyone, but there are a lot of options available. ... Read Answer >>
  5. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
Related Articles
  1. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  2. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  3. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  4. Insurance

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  5. Insurance

    How To Invest In Insurance Companies

    Knowing the special circumstances that insurance companies operate under helps in evaluating whether or not a listed insurance company is a good investment and whether the economic environment ...
  6. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  7. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  8. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  9. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  10. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
RELATED TERMS
  1. Bureau Rate

    A standard price per unit of insurance set by a state's insurance ...
  2. Lost Policy Release (LPR)

    A statement releasing an insurance company from its liabilities. ...
  3. Insurance Industry ETF

    A sector-following fund that invests primarily in insurance companies, ...
  4. Assessable Policy

    A type of insurance policy that may require the policyholder ...
  5. Early Warning Tests

    A series of financial ratios and other performance criteria used ...
  6. Broad Form Insurance

    Insurance coverage that extends beyond the basics to include ...
Hot Definitions
  1. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  4. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  5. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  6. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
Trading Center