Cancellation Provision Clause

AAA

DEFINITION of 'Cancellation Provision Clause'

It is a provision in an insurance policy that permits an insurer or an insurance company to cancel a property and casualty or a health insurance policy at any time before its expiration date. Life insurance policies do not contain cancellation clauses, and while health insurance policies contain cancellation clauses, the clause does not allow the insurer to cancel the policy.

INVESTOPEDIA EXPLAINS 'Cancellation Provision Clause'

Generally, a cancellation provision clause requires that whenever a party chooses to cancel the policy, that party must send a written notice to the other one. The insurance company is also obligated to refund any prepaid premium on a pro rata basis. For example, if the insured paid premium for three months and chose to cancel the policy at the end of the second month, the insurance company is required to calculate the premium that applies to the last month and refund it to the insured party.

RELATED TERMS
  1. Cancelable Insurance

    This is insurance that may be canceled, at any time, by the insured ...
  2. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning ...
  3. Insurance

    A contract (policy) in which an individual or entity receives ...
  4. Investment Income Ratio

    The ratio of an insurance company’s net investment income to ...
  5. Insurance Premium

    The amount of money that an individual or business must pay for ...
  6. Independent Agent

    An insurance agent that sells insurance policies provided by ...
Related Articles
  1. Insurance

    Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ratings by Weis.
  2. Insurance

    What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but there are times when it isn't.
  3. Insurance

    What are some examples of unexpected exclusions in a home insurance policy?

    Learn about commonly excluded perils with different standard insurance policies. Explore events that homeowners should consider when purchasing insurance.
  4. Thanks to the Affordable Care Act, you can no longer be denied health insurance for having a pre-existing or chronic medical condition.
    Insurance

    Choosing A Health Plan For Your Chronic Illness

    Thanks to the Affordable Care Act, you can no longer be denied health insurance for having a pre-existing or chronic medical condition.
  5. Four key factors to check out before you just sign up for dental insurance. The coverage could be really worth it – or not.
    Insurance

    Does That Dental Insurance Have Cavities?

    Four key factors to check out before you just sign up for dental insurance. The coverage could be really worth it – or not.
  6. Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio?
    Trading Strategies

    How Good An Investment Is Life Insurance?

    Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio? A look at the pros and cons.
  7. Insurance

    Tips for Finding Affordable Health Insurance

    One of the easiest ways to save money is to compare health plans sold on an exchange and those sold directly through an insurer.
  8. Insurance

    4 Steps to Finding the Right Health Plan

    Consumers buying health insurance on the individual market have more choice than ever. These steps can help lead you to the plan that's right for you.
  9. These days, those attending college have plenty of ways to get affordable medical insurance, from student health plans to those sold on an exchange.
    Insurance

    4 Smart Ways To Get Health Insurance In College

    These days, those attending college have plenty of ways to get affordable medical insurance, from student health plans to those sold on an exchange.
  10. Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
    Retirement

    The Smart Way To Use Life Insurance For Retirement

    Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center