Oct 30

How to Cancel an Insurance Policy – the Do’s and Don’ts

I want out! It has come time to cancel your insurance policy – how exactly is it done?  Is it as complicated as the policy wordings?  Well – No!  It is actually pretty easy!  Of course, it’s a simple conversation if you have an easy-going insurance broker, otherwise it might come with a bit of resistance.  As a policy holder, you have the right to cancel, so here is some simple advice on what to do and what not to do when canceling your policy.

Cancellation of insurance policies is a fact of the insurance business and from time to time, clients will ask me to cancel their policies – sometimes due to the fact that I have found a better insurance solution for their needs, other times because the solution that worked at a certain point in time, is no longer working for them and yet other times because they don’t need coverage anymore.

First, you have to know that the regulations are stacked in your favour – For an insurance company to cancel your policy; they have to have registered letters giving ample notice that they are going to cancel the policy, reason and – if you owe money – a chance for you to pay it back and continue along on your merry way.

If you are going to cancel the policy, there are several ways to get it done. Here is an ideal way and a non-ideal way to cancel your policy:

As a consumer you can cancel a policy:

a)  In writing – this is the absolute best way to cancel a policy (for you and your broker) – it should contain the following information:

  • Insured’s name(s) – the name of the people that are insured under the policy
  • The policy number – (may be different than the account number – depending on the company)
  • The company that is insuring you
  • The date you wish the policy cancelled
    For example: In consideration of the return of unearned premium to follow if any, I hereby request cancellation of   ABC Insurance Company Policy No. ABC1234 and any renewal thereof and hereby release the said Company from Month Day Year. Your name(s) would appear at the bottom of the letter underneath your signature(s).
  • All policy holder signatures – everyone listed on the policy needs to sign consent

b)  Stop paying your premiums – Does the job but NOT A GOOD IDEA!

Your policy will be cancelled but the aftermath will be different for the type of policy that you have, for example:

  • Auto & Home insurance – cancelled for non – payment: Not good at all to have on your record – may affect premiums in the future
  • Business insurance – cancelled for non-payment – Would you do business with someone who doesn’t pay you – insurance companies don’t look too kindly on businesses that don’t pay their insurance bills – it is hassle they aren’t fond of.
  • Life insurance – not paying your premiums is actually one of the few ways your “in-force” policy can be cancelled – still it is better to cancel in writing – it really gives you a chance to think about why you are cancelling and perhaps to speak to a representative to get advice.

One thing you definitely cannot do is request a change or cancellation of your policy(s) by leaving a message on your broker’s voicemail – they won’t accept it for several reasons including the fact that we cannot verify that it is indeed you that is leaving the message.

When cancelling your policy always ensure that coverage is in place first to replace the insurance policy that you are replacing (if you are replacing it).  You definitely don’t want to be caught without coverage!

So remember, like anything else in life – put it in writing and send it via fax, mail, or email and make sure to get a delivery receipt.  Make sure you address the notice to your broker and things should proceed smoothly.

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  1. Dean

    I changed home insurance companies on Aug 27th. I was quoted a rate on July 31 and answered all the questions accurately and properly. The property was inspected on Aug 7 by an inspector for the insurance company.
    On Nov 17 th, more than 3 months after the inspection I received notice that the insurance company has deemed that the cost to rebuild the home would cost $200,000 more than in my policy so they have amended my policy and I now owe them more Than $200 more in premium. This is months after the policy effective date.

    Is this legal or just bad business?
    Thank you

  2. Milan

    I live in Ontario. My question is:
    Why insurance companies insist that if you have two drivers in the house (my wife and I) and two cars, that each driver has to be principal driver on one of the cars?
    My wife has gotten her Canadian driver license a year and a half ago, so they consider her an inexperienced driver and when they put her as the principal driver for Honda Odyssey, the best rate we get is around 450 dollars per month (for two cars and two drivers). In reality, she drives Odyssey not more than 10 km a day and she doesn’t use it to commute to work. Only to take our son to school and back (2km one way), to go to a store, and similar. After my work and during weekends, I drive Odyssey and I easily drive 300 km a week. So, I drive at least 80% of the Odyssey mileage. I also drive 90% of the other car mileage, that I use only to commute to work (10km one way). My wife rarely drives the other car.
    Why can’t I be the principal driver on both cars, since I drive at least 80% of the mileage on either of the cars?

    Thank you.

  3. Claudio

    Not only it is legal, it’s good business practice. It protects you and the insurer. I would definitely want my property properly insured. There is only so much a questionnaire can estimate in terms of value for the property. Homes burn down all the time, it’s a catastrophic loss. I’d want my home replaced as it was.

  4. Claudio

    Actually all licensed drivers in the household must be listed on the policy and assigned to a vehicle, it isn’t the insurance company that solely determined this – it was made law by past governments. the premise is that 1 person can’t be driving 2 cars. At some point, you are both driving one of the vehicles at the same time – hence 2 principle drivers.What other license/experience does she have? some insurers accept letters of experience from foreign insurers which could help you.

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