Lost Policy Release (LPR): What it is, How it Works

What Is a Lost Policy Release (LPR)?

A lost policy release (LPR) is a statement releasing an insurance company from its liabilities. An LPR is signed by the insured party and signifies that the policy in question has been lost or destroyed or is being retained.

Historically, an insured party that wanted to cancel an insurance policy would have to produce the original insurance documents that the insurance company created when the policy was underwritten.

If the policy was lost or misplaced, the insured would then have to demonstrate that the policy is still being canceled, and this was done with a lost policy release. The lost policy release is used to signify that the policyholder is canceling the policy intentionally.

Understanding Lost Policy Releases (LPR)

Lost policy releases generally have standard language that is a holdover from the past. Generally, such releases carry the option of either releasing or cancelling a policy. While they sound different, both options are, in effect, the same.

Lost policy releases are not necessary in most modern insurance cases and do not require mailing back the original policy documents.

The exception might be an auto insurer, for instance, that might get a policyholder to sign a lost policy release, if they are switching over to a different auto insurance provider. Once this form is signed, the insurer is no longer liable for reimbursing losses to the policyholder, though this form would more than likely be filled out online.

Different Types of Cancellation/Lost Policy Releases

When filling out the lost policy release, also called a “cancellation/lost policy release,” the insured typically chooses between three types of cancellations: flat, pro-rata, and short rate.

Flat cancellations are used when the insurer was never exposed to risk because the coverage never went into effect. In this case, the premium is often refunded in full.

If an insurance policy is canceled before it is expired, the insured may be eligible to receive a portion or all of the remaining unearned premium held by the insurer. This is called a pro-rata cancellation. The unearned premium represents the money that an insurer has collected from the sale of the policy, but which is set aside to cover the liability created when the policy was underwritten.

Short rate cancellations are used when the insured fails to pay premiums and the insurance company requests that the policy be canceled. Lost policy releases may also be used if an insurer issues a replacement policy. Once a lost policy release is signed, the insurer is no longer responsible for any claims made after the cancellation date on the policy being replaced. However, in such instances, it may be smart to retain old policy documents just in case there is an issue that arises regarding the replacement insurance policy.