Oct 30

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

Categories:

Customer Satisfaction, Regulation, Uniquely Canadian

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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291 comments

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Claudio

November 13, 2012 at 12:59 pm (UTC -4) Link to this comment

thank you for your kind words Amie. Yes they can ask for the policy and pink slips back. It is a good standard practice for fraud prevention (not saying that you would do it, but insurance fraud is out there). She would also require proof of your new policy for her professional liability exposure – our role is to ensure that our clients are protected even when they leave us.
Claudio

November 13, 2012 at 1:03 pm (UTC -4) Link to this comment

I cannot speak to State Farms rules and regulations but excluding a high risk driver from driving a certain vehicle is fine and most likely a good idea. Yes, the agent is more than likely not able to do anything about the billing because that is left to another department altogether. In terms of the amount they are collecting, generally it would depend on the amount of time that they were on risk.
jason

November 24, 2012 at 8:51 pm (UTC -4) Link to this comment

Hi,

I’m thinking very strongly of cancelling my insurance, the reason is that I have so much responsibilities now, about a week ago they raise the cost of my insurance again, and I can’t deal with that anymore. I don’t go to the doctor at all so what the sense having it. can you please help me in this matter?
Claudio

November 26, 2012 at 12:08 pm (UTC -4) Link to this comment

what kind of insurance are you talking about? are you in Ontario? If so, please feel free to contact me: (416) 862-5605
Wendy

December 7, 2012 at 6:17 am (UTC -4) Link to this comment

I have an ongoing critical illness claim, which the company are taking a long time to get back to paying me out. now i have a letter saying “I am writing to update you on the progress of your claim.
Please note we do still require:
The original plolicy documents. If they cannot be located then discharge form.
Payment instuction form.
2 forms of id.

We will continue to keep you up to date on the progress of the claim.”

My question is they have not said they will be paying up or have they?

Wendy
Claudio

December 7, 2012 at 11:11 am (UTC -4) Link to this comment

Sounds like they will be paying and want to ensure that they are paying the right person and the right place – for example, if you want the money directly deposited, they can do that. The information they require seems to be procedural.

I hope you are feeling okay, it is never a good time when a Critical illness policy must be paid out. My thoughts and prayers are with you and your family.

Claudio
Derek

January 10, 2013 at 4:35 pm (UTC -4) Link to this comment

I am terminating my home insurance. I pay it monthly and the policy is just past the half way point in the year.
The termination clause in my policy says this:
“Where this contract is terminated by the Insured, the Insurer shall refund as soon as practicable the excess of the premium actually paid by the Insured over the short rate premium for the expired time, but in no event shall the short rate premium for the expired time be deemed to be less than any minimum retained premium specified.”
What does it mean? I understand it up to the point “…short rate premium for the expired time” Thanks. Derek.
Claudio

January 10, 2013 at 5:50 pm (UTC -4) Link to this comment

when an property and casualty insurance policies are cancelled, there are several ways to determine what is owed to each of the parties that formed part of that insuring agreement (a legally binding contract). Short rate means that a premium is charged on the amount owed up to about the halfway point of the policy. the opposite to short rate is Pro-Rata.

What the wording is saying is: whatever the short rate calculation comes up to, it shall be not less than the minimum retained (non-refundable premium) indicated on the policy.

hope this helps!
Anonymous

January 23, 2013 at 11:54 pm (UTC -4) Link to this comment

Where exactly did you get the ideas to publish ““How to Cancel an Insurance Policy – the Do
Claudio

January 24, 2013 at 2:13 pm (UTC -4) Link to this comment

I am a registered insurance broker in the province of Ontario and a registered Life / Benefits broker in the same province. The idea came from the intent to assist people. It has been a popular concern as many seem to have questions about this subject.
Sue

January 28, 2013 at 1:58 am (UTC -4) Link to this comment

Hello. I am having some difficulties with my home insurance RBC and their payment schedule via my Amex. They sent me a registered cancellation letter due to non-payment supposedly. They kept on taking it out a day early and I have proof from Amex, however I talked to RBC on the phone and they says that’s impossible and say it is still going to be cancelled. I even faxed them the proof. Its actually technically a matter of an hour from when Amex recieves my payment, frees up my availability and RBC goes in. Do I have any recourse? It’s so ridiculous! Also, if I’m doomed,can you recommend another insurance company that is a reasonable and more customer service oriented?
By the way…Thanks for this terrific forum!
Claudio

January 28, 2013 at 11:06 am (UTC -4) Link to this comment

That simply sucks. I honestly think your best bet is with a broker. Feel free to contact us and we can help or if you know someone, contact them. A word of caution – cancel your policy before they cancel you. You don’t want the policy cancelled for non-payment. You will have a hard time finding insurance after than and you will be required to pay up front.

The broker who represents you can fight on your behalf and can get around some of the red tape.

Thank you for your kind words
Cody

January 31, 2013 at 3:59 pm (UTC -4) Link to this comment

My home insurance provider (TD Meloche Monnex) called me today and told me that if I make three claims on my home insurance policy within three years then they will not renew my policy at renewal time. Unfortunately, I already have two claims within the past year, so one more claim would push me over the edge!

Will having an insurance company refuse to renew affect my ability to be insured the future? Is there some kind of “permanent file” which insurers from different companies can refer to to find my insurance history? Do you think it’s a good idea for me to find a new home insurance provider now?
Claudio

February 1, 2013 at 12:14 pm (UTC -4) Link to this comment

okay so my question is this: Why do you have 2 claims in the past year? Yes there is a permanent file that records the claims on every home in Ontario. the insurers know when, how much and why. I have seen people but in claims for damages under $1,000 then wonder why they cannot get insurance anymore.

My advice, which I follow as well is this: Make a claim when it is a big ticket loss. If you have anything under a couple of grand – just fix it yourself. I just repaired windows that were sling-shotted by some vandals. I did not go through insurance because it isn’t a claim i want on my file. Yes, we do buy insurance for these kinds of things but it isn’t a deposit account for every loss – the insurance company needs to recoup costs and/or cut the account that costs them money. They expect there to be losses and usually pay but if they are collecting $1 and paying out $1.05 – they cannot hope to stay in business.

You will have a hard time finding inexpensive coverage with 2 claims so i would stay claims free for a few years then seek out a broker who can give you proper advice.

Hope this helps.
Cody

February 3, 2013 at 5:42 pm (UTC -4) Link to this comment

Thanks for your advice, Claudio. The causes for my two claims were hail damage to the roof, and a leaking pipe in an upstairs bathroom which dripped down through the living room ceiling.

If I knew then what I know now, I would not have claimed the damage caused by leaking pipe. Unfortunately, I am a new homeowner and I didn’t realize that claims should be avoided if possible.

I will do my best to stay claims-free from the next couple of years, but I am still concerned. What if something catastrophic happens (e.g. my house burns down)? Even if I have to pay a bit more, I would feel safer if I knew that – in the event of a real emergency – my insurance company won’t drop me as soon as I make one more claim.
Claudio

February 4, 2013 at 11:43 am (UTC -4) Link to this comment

understandable Cody. Look, i will send you a quick questionnaire. Complete it for me and I will have our office look into it for you and offer you options. The people I work with and the companies I work with are good and are customer focused.

Claudio
how to build a horse run in shed

February 25, 2013 at 5:33 am (UTC -4) Link to this comment

Great blog! Do you have any tips and hints for aspiring writers?
I’m hoping to start my own blog soon but I’m a little lost on everything.
Would you advise starting with a free platform like WordPress or go for a paid
option? There are so many options out there that I’m completely overwhelmed .. Any recommendations? Appreciate it!
Claudio

February 25, 2013 at 10:56 am (UTC -4) Link to this comment

thanks so much for your feedback! My advice, lots of content, make it personable and have fun with it. I have found the wordpress site quite good and i continue to use it…

Claudio
J.B.

February 28, 2013 at 3:47 pm (UTC -4) Link to this comment

I was involved in an accident. It wasnt my fault, I have witnesses, and the driver of the other car took off. My grandpa had added me as a part-time driver while I was living with him. He moved out and the policy changed, which took me off as a covered driver. I had not known this at the time of the accident. The insurance rep said she would still help with the claim because I had permission to drive the car and the car was covered under my grandpas policy. The claim is just in the beginning stages, but I told my grandpa to cancel because he doesnt actually drive the car anymore. I went and bought my own insurance through a different company. Will they still help with the claim since it was covered when the incident took place?
Claudio

February 28, 2013 at 3:54 pm (UTC -4) Link to this comment

sorry to hear that especially having been through that experience. No the new insurance company won’t be handling the claim – it will be the company who was insuring the vehicle at the time.
J.B.

February 28, 2013 at 5:51 pm (UTC -4) Link to this comment

Thank you for the quick repsonse! I read through the article and comments here below and you appear to be very informed. I’ll refer people back to this site! Thanks again!!!
J.B.

March 11, 2013 at 2:02 pm (UTC -4) Link to this comment

I took my car to an auto body shop. They seem to think insurance is going to total my car. Would I be able to pay the difference. For example, if the car was worth 2,500.00 before the accident and the repairs total over 3,000.00 could the insurance cover up to 2,500.00 and then I pay the difference to the auto shop?
Claudio

March 11, 2013 at 2:18 pm (UTC -4) Link to this comment

that is a decision that you and the adjuster can certainly come to terms with – once they have had the opportunity to review the vehicle, they will relay the insurance company decision at which point you can ask them
Nate

March 15, 2013 at 5:36 pm (UTC -4) Link to this comment

Hi there,
How can an insurance company deny a claim and then state that the person has only one year to fight that? I left it too long as I was doing reseach and piling up evidence (and slacking) only to learn that there is a supposed one year rule? Who makes this rule? How can a company deny your ability to go after them? Shouldn’t that be an independent, unbiased decision?
Please advise as I believe I have a very strong case. Thanks.
Nate

March 15, 2013 at 5:38 pm (UTC -4) Link to this comment

I made an error. They did not deny the claim – they found me 100% at fault despite OAS regulations that state that it is not at fault (flying debris).
My lawyer friend stated that ins companies do this because many people do not fight it. Is this true?
Claudio

March 15, 2013 at 8:13 pm (UTC -4) Link to this comment

Hi Nate,

Sorry to hear. The insurance company sets limitation to commence legal action simply because it is written in common law. If there is a genuine case, it is up to the plaintiff to at least begin legal action and make that declaration to the insurance company so that they can prepare their defense, set their reserves etc. The rules behind the Insurance companies are found in the Insurance Company Act which was created by parliament not the insurance companies just arbitrarily deciding.

I am not a lawyer nor am i qualified to comment on the legal aspects of this particular situation, but any personal injury lawyer can tell you about how that works.
Lee

April 2, 2013 at 6:32 pm (UTC -4) Link to this comment

Last year our life insurance policy term came to an end and we where notified by our broker to find a better policy. We did, however we (my wife and I) had to submit medical information and have some tests done. As a result of this process, our old policy finished up and we still hadn’t been officially accepted on our new policy. Our broker suggested that we don’t cancel the old policy until officially signed on to the new one…therefor we carried the old policy at the higher rate. Well here’s the kicker…today we found out from our broker that we’ve been carrying both the new policy and the old (at the higher rate) for the better part of a year. While we didn’t catch this on our financials, it seems like our broker isn’t willing to burden any the responsibility in seeing the transition between policies through to good standing. My question is, is there any recourse to this situation from our policy holder or broker? Have we lost the money we over spent on the old policy? In your experience, doesn’t our broker handle the policy cancellation details (I.e. walk us through it)?
Claudio

April 4, 2013 at 5:02 pm (UTC -4) Link to this comment

Due to my limited information on your particular situation, all i can do is speak in general terms. First of all, that sucks. As your broker there is actually a form he has to complete if a policy is replacing another policy (i think most apps have a section asking if the policy is replacing another policy). there are significant checks and balances for this type of thing (I’ve done it before so i know). Further, if you are receiving a new policy, i assume it has to be delivered to you and you have to sign that you have received it. The old policy has to either be cancelled by a signed direction from you or the ceasing of payment of premiums.

You can speak to his MGA, the insurance company etc or at the worst case the financial services commission.

Hope this helps.
Joe

April 20, 2013 at 7:48 pm (UTC -4) Link to this comment

My wife’s grandmother had problems with bats in the roof. She called in pest control and found out that the price would be around a couple of thousand dollars. Bat poop I guess is pretty dangerous. So pest control tried to put it through insurance and come to find out she has not had insurance on her home since October 2012. Now being from new brunswick I would like to know if there are rules and regulations for canceling over the phone because this is what happened according to state farm. They also said you don’t have to sign anything. She has been there since 1983. Just curious if we as family have a leg to stand on
Claudio

April 22, 2013 at 8:16 am (UTC -4) Link to this comment

that is an unfortunate situation and why it is so important to have written and endorsed cancellation requests. I don’t know about State Farm’s policies but there should be a reason or some paper trail as to why the insurance was cancelled. You may also wish to speak to a lawyer who specializes in contract law (since an insuring agreement is a legal document).
Ram

May 25, 2013 at 6:20 am (UTC -4) Link to this comment

I have switched my auto policy from State farm to another company. They new company agent said that he will cancel they state farm insurance. But he send they letter late. Now I have a record for cancellation for non payment. How can I clear this?
Correna

May 26, 2013 at 5:18 pm (UTC -4) Link to this comment

Hello
I could use some advise.
I phoned an insurance company for a quote for auto insurance, agreed to the quote, he faxed me the papers, the quote was wrong, called and they resent another quote, still not the amount stated to me over the phone.
I called and gave a verbal that I wanted to cancel it (18 days from the first phone call). Nothing was said about me having to send in a letter in writing stating my wishes. Got a call 25 days from the first quote date stating they hadn’t received that letter, which was true because nothing was said previously, they emailed me the form and I faxed it back the next day. They tried taking out a payment, luckily for me I had put a stop payment on it.
Now they are asking for a payment of 443.00 dollars….
What can I do so I don’t have to pay? What is the rules with cancelling? Isn’t there a time frame in which a person can review a contract and cancel without penalty?

Thank you
Correna
Claudio

May 27, 2013 at 12:31 pm (UTC -4) Link to this comment

Hi Correna,

That is an unfortunate situation and why it is always so strongly advised to get things in writing. Each company has its own rules for cancellation but generally the money that they are asking for is most likely for the time that they insured you (aka time on risk) plus some cancellation fees.

All insurance quotes are estimates – it is written in the contract and it is written in the quotes until the final premium is sent out.

In this case, you would be best served to pay the amount off. It will show up on your insurance record and the company may send collectors out for it.
Claudio

May 27, 2013 at 12:33 pm (UTC -4) Link to this comment

You can’t I’m afraid unless you can show proof that the broker/agent promised to cancel the policy for you (which he cannot with out your signature). Either way, it is the responsibility of the insured to cancel a policy in writing. The contract of insurance was agreed to by you and only you can say you don’t want it anymore.
Anonymous

May 28, 2013 at 10:11 am (UTC -4) Link to this comment

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fred

June 1, 2013 at 7:33 am (UTC -4) Link to this comment

hi,i’m from here in ontario. i had a life insurance policy that was paid up. took it out and put it in another policy with a different insurance company. have had it for about 10yrs. life situations have changed and want to cancell this policy . what would the right proceedure be to cancel and roughly what percentage of the cash value would i get from this policy to reinvest in something different. regards fred
Betty

June 2, 2013 at 3:13 pm (UTC -4) Link to this comment

I have 2 vehicles a house and a travel trailer insured with State Farm. I have been with them for years and years and yet if I call they often are not available or do not respond to my questions quickly. I am really fed up.

I also have concerns about charges that appear on my statement for which there appears no clear reason. Almost every statement is different and the agent doesn’t give me a good answer as to why.

I am therefore looking to go somewhere else. My fees are prepaid monthly so I realize there will be an adjustment but does State Farm charge a PENALTY if the policy is cancelled before the due date?
Cynthia

June 4, 2013 at 3:04 pm (UTC -4) Link to this comment

I have a brand new insurance policy. Turns out the car that I was going to take possession of has way too many repairs that need to be done. So i’m not going to own the car. i’ve had insurance coverage for 5days. My premiums haven’t even been paid. I just received the papers in the mail yesterday. I called to cancel and was told that i still have to pay the first and last month payments. Isn’t it true that i have 10days to cancel anything that i agree to? Shouldn’t the insurance company only charge me for the days i’ve had insurance for…the 5 days??
Claudio

June 5, 2013 at 9:58 am (UTC -4) Link to this comment

that is a terrible story. I cannot believe that they are asking for that. It usually takes a few days to upload a policy anyway and if the deal falls through, you can simply void it – no harm no foul…

is it a broker that you are dealing with or agent? i would argue that there was no vehicle purchased hence no need for the coverage. The policy shouldn’t have even stared until you actually picked up the car because you had no insurable interest in the vehicle until you took possession. The policy written was invalid from the start!
Claudio

June 5, 2013 at 10:22 am (UTC -4) Link to this comment

Hi Betty,

Every company charges something if the policy is cancelled before it’s natural conclusion. I have found that often these companies stagger the renewal date which makes it very difficult to cancel the policy without incurring some type of penalty.

I would encourage to you to contact me and let us take a look at this. My philosophy is to make things as simply and straightforward as possible. My team can review, put together options and clean things up and ensure that we are here for you when you need.

you can email me: info@insurancehelp.ca or call the office.
Claudio

June 5, 2013 at 10:25 am (UTC -4) Link to this comment

Hi Fred,

The proper way to do this is to contact the company or the agent that you dealt with and speak directly to them. simply cancelling the policy is easy – put it in writing. In terms of the cash value etc, i wouldn’t have a clue because i don’t have your policy documents in front of me. There is so much information missing that it wouldn’t be professional for me to give you an answer.

If you would like us to look at the policy, please feel free to email me a copy to info@insurancehelp.ca. We can discuss options for your continued protection etc.