If you receive a letter from your insurance company about the status of your policy, it can be confusing to your overall insurance business plan if you are unfamiliar with the language. However, it is important that you understand the difference between the cancellation of your policy and a nonrenewal. These terms are vastly different and require different responses on your part. Read on to learn what the differences between these terms are.
A policy nonrenewal occurs after the insurance company determines, or after you decide, not to renew your policy when it expires. If your insurance company decides not to renew, they must give you adequate notice based on the laws established in your state, the notice must outline the reasons as to why they have chosen not to renew your policy for another year. If you think their reasons are unfair, you may call the insurer for further explanation.
Here are some reasons why your policy may not be renewed:
- The insurer does not carry that particular line of coverage any longer.
- The insurer has decided to write fewer policies under that specific line of coverage in your area.
- Your company committed an act that raised the insurer’s risks significantly (e.g., too many claims during a policy period).
The cancellation of a policy is slightly different, as are the laws that govern it. Be aware that your insurance company cannot cancel a policy that has been in effect for more than 60 days unless you do not pay your premium, you are found to have committed fraud or you misrepresented your company on the insurance application.
If your policy is going to be canceled, you will receive notice well in advance. After a cancellation it can be difficult to obtain a new policy; other companies may see you as a risk because you did something to be canceled from your original insurer. If you do receive a cancellation notice because you failed to pay your premium, you may be able to resume your policy by paying for an entire year’s worth of premiums up-front. If this is not an option, then you may have to opt for a high-risk policy.
Understanding cancellation versus nonrenewal can be a tricky part of your insurance business plan, just like certificates of insurance. Contact Coterie Insurance for more explanation on these concepts or for assistance with your commercial insurance policies.