Most Americans carry some type of insurance on their cars, homes, and even themselves. There are multiple kinds of insurance available to consumers, each with different policies and plans.

In most states, an insurance company must give a policyholder written notice of at least 30 days before canceling a policy, which is a formal contract. The policy between the insured and the insurance company specifies the reasons the insurer can cancel the policy and the time frame and method in which it can do it. Being at risk for losing your insurance can be a frightening financial concern, but there are ways to communicate and negotiate with your insurance company, should this occur.

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. It is important to read all insurance policies carefully and ask your insurance agent to provide you with answers if you have any questions. A 2018 survey done by found that nearly one-fourth of homeowners polled stated they did not read their policies, which could leave them open for problems down the road.

Some Typical Reasons for Cancellation

  • Intentional damage done to an asset like a car or home
  • If you have a criminal record or are deemed a "moral risk," or you have a change in your life situation
  • Too many missed payments or neglecting to pay any outstanding bills
  • In some states, homeowner's 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 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. The National Association of Insurance Commissioners (NAIC) is a great resource and lists each state commission's office.

Ways to Negotiate

It is always worth a call to your insurance company to try to halt the cancellation by coming up with a satisfactory solution to the complaints by the company. First, make sure the information in your file is up to date and accurate. Review the situation and come up with possible solutions. For example, if your homeowner's insurance is being canceled due to too many claims for water damage on file. Ask if you can remove water damage from your insurance going forward, or offer you a policy that doesn't cover water damage in it.

The Bottom Line

An insurance company does have the right to cancel your policy if you do not fulfill the policy agreement. However, by using resources like the NAIC, which can offer free advice and services to policyholders, and trying to negotiate with your insurance company, it may be possible to keep your insurance.