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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

    Hi
    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

    Hello,
    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.

  5. Paula

    Hi Claudio, my name is Paula Fernandez. My husband and I own a small business. We have been paying crazy amounts of money for commercial insurance for the past 4 years. In October we decided to take off some of the insurance in some of the trucks, just for the winter and the put it back on in the spring, as we don’t use those trucks very often during the winter. This is specifically the comprehensive insurance. So my husband went into the brokers office and just signed the front page of our old clause with a little hand written message that said delete comp. On October 18 we got the policy change letter that didn’t explain what was actually changing but it did show all the new payments and new codes and the new pink card. in our bank statements we didn’t see a change in the amount of money withdrew until Dec1. Unfortunately, our semi truck started an electrical fire on December 18, and it is gone. this happened 18 days after they starting withdrawing the new amount with the new policy. Is there any chance our commercial policy was still effective?, I know sometimes commercial policies can have a 30 days before cancellation is actually effective. Our insurance is not being very helpful, and they did take a long time to adjust our monthly payments. do you see any solution to our problem?
    Thanks, so much

  6. Ken

    I moved to Ontario from Nova Scotia in October. Before I left, I told my broker about my moving. One week after I moved to Ontario, I received a letter of notice showing the auto insurance rate for the next 8 months – the rate maintained the same (around 190 CAD). I supposed the company had known my moving and didn’t pay any attention on this. Then I didn’t receive the letter for notice and didn’t contact with my broker (I changed my phone number but forgot notifying). Until I checked my bank account last week, I found I was charged for more than 3,000 CAD for December. Yes! 3,000 CAD!!! I called my broker and requested to cancel the policy. I was told I could get some refund. But as the process for calculating takes time and it is during holiday, I am very anxious about this. I’m wondering:
    1) Is it legal for insurance company to change the insurance rate and charge from my bank account without my accept (although they said they had sent the letter but I didn’t receive it)?
    2) Can it be considered as a new contract? Is there a cooling-off period for auto insurance?
    3) I was charged around 3,000 for December, and the rate for next several months is about 1,000 CAD. Was the 3,000 included the fee for the last month (as a deposit)? If it is, can I get the deposit back? 6 days passed from the day I was charged to the day I cancelled the policy.

    Thank you! Have a good holiday!

  7. Claudio

    That’s a tough one. Once they have your approval for withdrawaling funds and they have given proper notification (by sending letters), they can legally go in.

    There are questions that you are asking that i cannot answer without knowing much more about your policy, where you live, your driving record etc. It would seem that it would be prudent for you to take the bull by the horns and shop it around.

    Happy holidays!

  8. Claudio

    Well, if you don’t use the vehicles, you would remove road coverage not comp cover. Seems to me that you have a serious case of non-communication with the broker. The coverage would have been removed the day your husband signed.

    Where are you located? If you are in Ontario, i may be able to guide you. If not, i’d consider a different broker because your situation sounds complicated

  9. george

    in have a small marine sales buisness that i wish to eliminated i have a commercial policy which covers a few boats that i are currently in the buisnes name. a few years ago i did alot of repair work on boats but now in the past four years only some very small cosmetic flooring installation that will also cease because of the high cost of liability. ten years ago i had a claim where i did some repairs to a clients boat. the boat sank but was not proven wheather i was to blame he did not carry any insurance, ironically he was a lawyer . it was settled out of court and my insurance covered 2/3 of the claim. now my rates are so high that its not worth it. i have not done any repair work for the past four years. so my question. Is there any way that i can be sued if i cloes out the buisness and cancel the insurance do need run on isurance and for how long

  10. Jen

    Hi,
    I would like to ask if home insurance automatically renews at the end of its term. I had a home insurance policy with Aviva. At the expiry of the one-year term, I no longer needed the insurance but took no action, thinking that the insurance would simply expire on the date stated on the contract. Soon after, I received a notice of cancellation from the company and a request for payment for the additional “time on risk” that extended beyond my initial term. The contract itself did not indicate that the insurance would automatically renew, so I am confused as to why I was insured beyond the initial one-year term. Is this normal?
    Thanks!

  11. guest1

    Does my broker have any legal obligation to tell me my auto policy has been cancelled for non pay as i was on monthly payments or is the letter from the company all that is legally required(i cant remember if i got it but they said it was registered)

  12. Claudio

    yes a letter like that has to be registered and usually comes from the insurance company directly.

  13. Claudio

    yes the policies renew automatically for the protection of all the parties involved. In order to break the contract, there must be written request to break the contract. The request can come from you or the insurance company.

  14. Claudio

    that is a tough situation and while i cannot answer specifically to your situation, generally speaking, your commercial general liability would ensure coverage for your completed operations even after you close the business up to a certain time frame (a year or so max). If you close the business and are sued for work completed last month (during the active policy period), you would be able to approach the insurance company and make a claim.

  15. Latoya

    Hi, I tried canceling my life insurance as it I don’t feel that it suits me; however i had signed up with a family member who is an agent, when they caught wind of what I did from the compay, they contacted me to see how they can help me get a better policy. I ended up resigning out of guilt. is it possible to cancel with out the insurance company notifying my broker family member that i’m canceling?

  16. Claudio

    oh man! unfortunately they have to be made aware of changes in policies

  17. Mark

    My wife and I recently separated. She is now living in the condo (which we had been renting out) we own (which we had been renting out) and I am living in the house. The two insurances were bundled together. When I went to cancel the insurance so we can pay separately I was told that I would be charged a fairly hefty cancellation fee if I did it before the term expires (7 months from now). I feel I am being held hostage by the large fee. Is this legal? How much of a fee, if any, can they charge?

  18. Claudio

    Hi Mark,

    I’m sorry to hear that. Having been through a divorce, it is a whirlwind of emotions but ironically is one of the times when you both have to work together even more than ever. You should be able to simply remove the insurance on the condo and your ex would start a new policy but (here is a big but), if title of the properties remains in both names, then you will have other issues to deal with before insurance can be changed. Do you have mortgages? That will be affected as well. Insurance is a legal agreement as is the ownership of real property and mortgages. If however, the titles are clear and ownership is divided legally, you shouldn’t be charged a penalty for simply removing the rented condo from the policy.

  19. Tammy

    Quick question. My dad was acting quite irrationality and cancelled his life insurance a few months ago. It turns out that he has cancer and brain tumours. Is there any way we can contact the insurance company about reinstating his policy, due to the fact that the Tumors are causing him to have no logical thought process because of the location of the tumors?

  20. Claudio

    Hi Tammy,

    I’m sorry to hear that. This seems to be a case of proving mental capacity and possibly assigning a living power of attorney. I would certainly plea the case to the company but you would need supporting evidence. This is unfortunately outside my training and i cannot advise other than to say that you may wish to consult legal advice.

    Thoughts and prayers to your dad and your family.

  21. Andrea

    Do I have the right to look in my house insurance file, last week I went to see my insurance broker cause we made a claim for flooded basement, she told me she had just received a letter from the one who was taking care of our claim and I asked her if I could see it and she told me no that it was confidential. So since then I’m thinking they are hiding something from me. See when I spoke to him he told me we had water damage for at least $15000.00 but we were only covered for $10000.00, and there is that $1000.00 deductible and the bill for the cleaning company that came to clean our basement was for $2000.00, so that leaves $7000.00 for us right, and she told me the cheque was under $5000.00, so this is why I would like to see what he send my broker, I feel something is not right.

  22. Claudio

    That is strange. Have you contacted your broker to get the information? Were you under insured? If so, you would have recourse against the broker to recover the damages.

  23. Victoria

    I currently drive a company vehicle for which my company pays for the insurance so i put my personal vehicle on “Comprehensive Only” insurance (for a parked vehichle). The insurance company insisted that I must retain accident benefits through them – is this accurate?

    Thanks

  24. Evelyn

    Hi there,

    Hope you are doing well. So I have a quick question, my auto insurance is questioning my address so they have asked a submit a utility bill and want my credit card history for last 2 months. I don’t mind the utility bill (I own the house with my parents) but don’t feel comfortable sending my credit card bill and information. They stated if I don’t they will cancel my policy. Can they do so?? I didn’t know one had to be actively using a credit card to have auto insurance.

    Is there anything else I can give them as proof of where I live??

    Thanks.

  25. SK

    Hi,
    I have a auto insurance policy renewal due next month. In my 1st year of coverage, I had 2 minor tickets drop off my record and no accidents or claims this year. however, the premium did not drop significantly. When I try to get a brand new quote from my company’s website for the exact same coverage and vehicle, I am getting a quote for almost $280 less per year! What in the world is going on? Should I cancel my current policy and sign up again with the same insurer for the lower quote or should I call them to complain? Does cancelling my policy and getting the new one from the same company have any effect on my record? Please advise.

    Thanks,
    SK

  26. anna

    Hi. Actually i’m still waiting for my insurace policy. But, I have other business oversea for couple of weeks. My question is, what would happen if I don’t sign the policy?

  27. Claudio

    if you aren’t driving the vehicle and it’s parked, you only need comp cover. Accident benefits would be provided through the company policy

  28. Claudio

    because 2 cars + 2 drivers = 2 principal drivers

  29. Claudio

    because it depends when the tickets came off. the company needs to be made aware of the tickets coming off and even then, they make the changes at renewal. It may behoove you to cancel and start a new policy.

  30. Juliette

    By cancelling my life insurance policy, can I assume that there will be a cash payout?

  31. Elaine

    I was wondering if it was legal for an insurance company not to refund you premiums? Supposedly, I can cancel the condo insurance at any time but I won’t be prorated for a refund

  32. murray

    I just sold my motorcycle. I’m insured in Ontario. I’ve just sold my bike and want to cancel my insurance. The policy is about 800$ a year. I renewed in Feb. It’s now July they want to charge me a 485$ dollar cancellation fee. Is this legal?

  33. Claudio

    it depends entirely on the policy contract. Remember, most of the insurance for motorcycle insurance is earned in the summer. I would consult the policy document for guidance

  34. Claudio

    depends on what point of the policy year that you cancel it. Your broker/agent should be able to give you more information

  35. Claudio

    not necessarily … Term policies have no cash values. Whole life insurance has cash value after a certain time….I’d consult the policy

  36. Kevin

    I cancelled my car insurance June 12, 2015. My renewal date was July 9th 2015. followed my Brokers instructions she didn’t put it through till the cancellation date. When I took the insurance 2 years ago they charged me 2 months. first and last. now the insurance company itself is saying it’s my job to get the broker to give them the last month or I’m on the hook for it. would appreciate any advice as I’m new to this. Just got my license 3 years ago

  37. Karen

    Hi after spending several hours on the phone with my insurance company (getting my son his own policy) I was very upset about how much I am being charged for Insurance. I mentioned finding another company and was told I would have to pay two months premium to leave. I never heard of cancellation fees for insurance. Is this new? How long has this been affect? Did I have to be informed of this in advance? I had no idea and had never been charged by another company for leaving for any reason. Thank you for your help.

    Karen

  38. Claudio

    Hi Karen,

    There have always been a fee of some sort to cancel a policy but it really depends on many factors. For auto coverage, it’s mostly depending on the point in the policy year when you cancel. Also, so many companies have so many different rules but they should all outline cancellation procedures within the policy documents themselves.

  39. Claudio

    if you have proof that you sent money to the broker, i would submit that to the insurance company. You should not be responsible for ensuring that the brokerage pays the insurer. There could be some seedy actions happening.

  40. Claudio

    depends entirely on the type of policy…

  41. Claudio

    I think we spoke off-site on this but I have never seen the need to show a utility bill – driver license shows the address details.

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