What is a cancellation provision clause?

A cancellation provision clause is something that’s in a lot of different insurance policies, like for your house or your car. It’s a part of the contract between you and the insurance company. What it does is it gives you the right to tell the insurance company “hey, I don’t want this insurance policy anymore” even if the end date on the policy hasn’t happened yet. As long as you tell them ahead of time in writing that you want to cancel, you’re allowed to do that because of this clause.

Why would you want to cancel your insurance?

There’s a bunch of reasons why you might want to cancel an insurance policy early. Maybe you found a better deal with a different insurance company and you want to switch over to save some money. Or maybe you’re selling your house or your car, so you don’t even need that insurance anymore. Could be that you just aren’t happy with the service from your current insurance folks. Whatever the reason, if you’ve got a cancellation provision, you’ve got the option to get out of that policy if you need to.

How much notice do you have to give?

One important thing about these cancellation clauses is that you can’t just cancel anytime you want and expect everything to be cool. You’ve got to give them what’s called “adequate written notice.” That means you need to send them a letter or email telling them you’re canceling, and you’ve got to do it far enough ahead of time. How far ahead of time? Well, that depends on the specific policy. Some might say you’ve got to tell them 30 days before you want to cancel. Others might say 45 days, or 60 days. You’ve got to read your policy real careful to see what it says about how much notice you need to give.

What happens after you tell them you’re canceling?

Alright, so you’ve sent off your cancellation notice to the insurance company. Now what? Well, a few things are going to happen. First off, they’re going to process that cancellation. That means they’re going to update their records to show that your policy is ending on the date you told them. They might send you a confirmation letter or email just to let you know they got your notice and everything is taken care of.

Do you get a refund if you cancel early?

The next question you might have is, “Am I going to get any money back if I cancel before the end of the policy?” The answer is… maybe. It depends on how your specific policy is set up and how much of the policy period you’ve already used up.

If you’ve paid in advance

Let’s say your policy was for a whole year, and you paid for that whole year all at once up front. Now, halfway through the year, you decide to cancel. In that case, yeah, you’re probably going to get some money back. The insurance company will take the amount you paid, figure out how much of that was for the time you already used, and then give you back the rest. So if you paid $1200 for the year and you cancel right at the six-month mark, they might give you back around $600.

If you pay month-to-month

Now, if you’ve been paying your premiums month-to-month, it’s a little different. In that case, when you cancel, you’re probably just done paying from that point forward. You likely won’t get a refund for the current month, because you’ve already used up some of that month’s coverage. But you won’t owe them any more money for the rest of the policy period.

What about cancellation fees?

Another thing to watch out for is cancellation fees. Some insurance companies might try to charge you a fee for canceling your policy early. They might say it’s to cover the administrative costs of processing your cancellation or something like that. Not all policies have these fees, but some do. Again, you’ve got to read your policy carefully to see if there’s any mention of cancellation fees.

Are cancellation fees legal?

You might be wondering, “Is it even legal for them to charge me a fee for canceling?” The answer is, in most cases, yes. As long as the fee is spelled out in the policy and it’s not some crazy high amount, it’s probably legal. Insurance companies are allowed to put these kinds of fees in their contracts.

Can you negotiate cancellation fees?

If you’re looking at a cancellation fee, you might think about trying to negotiate with the insurance company. You could explain your situation, tell them why you need to cancel, and see if they’re willing to waive the fee. It’s not a guarantee, but it’s worth a shot. The worst they can do is say no.

What if the insurance company cancels your policy?

So far, we’ve been talking about when you want to cancel your policy. But what about if the insurance company decides to cancel on you? Yeah, that can happen too.

Why would an insurance company cancel a policy?

There’s a few reasons why an insurance company might cancel your policy. The most common one is if you don’t pay your premiums. If you miss a payment or two, they’ll probably send you some warnings. But if you keep not paying, they’ve got the right to cancel your coverage. Another reason might be if you lied on your application or left out some important information. If they find out about that, they could cancel. Or if you’ve filed a lot of claims, they might decide you’re too risky to insure and cancel your policy.

Do they have to give you notice?

Just like you’ve got to give them notice if you’re canceling, they’ve got to give you notice if they’re canceling. The amount of notice they have to give is usually spelled out in the policy or in state laws. It’s often around 30 days, but it could be more or less. During that notice period, you’ve still got coverage. But once that period is up, your policy is done.