Insurance companies may terminate your policy if you take excessive claims.
Insurance is an agreement between a client and an insurance provider in which the provider agrees to pay for some or all of the client's losses in the event of an accident or disaster. In return, the client pays a specified rate, known as a premium, to the insurance provider, usually in a lump sum or by the month. Although insurance is a good idea in many circumstances and sometimes is required by state law, there are instances where either the client or the insurance provider may wish to terminate an insurance policy.
Definition
Termination of insurance is a series of protocols in which an insurance client or provider opts to end an insurance coverage contract. It occurs in every insurance sector, including business, automotive and health insurance.
Initiation and Reasons for Termination
Both the insurance client and provider may initiate insurance cancellation. Clients usually terminate because they've found better rates or services. Providers usually terminate because of lack of payment or because the client has made an excessive number of policy claims.
Termination Method
Insurance providers typically require an insurance client to submit his request for insurance termination in writing. Similarly, an insurance provider typically provides written notice to the insurance client that the provider is about to cancel the policy. This leaves a legal record of why and when the policy was terminated, according to Ampminsure.com, which provides a sample cancellation letter in the Resources link.
Some sectors of insurance require that an insurance client submit a termination of insurance request letter before or after another action is taken. For example, if a client in North Carolina wishes to terminate auto insurance because she doesn't plan to use her vehicle, the client must surrender the vehicle registration plate prior to terminating her insurance or face a fine, according to the North Carolina Department of Motor Vehicles. For this reason, and since termination regulations vary by region, it always is advisable that an insurance client ask their provider or local authorities at what point the termination letter needs to be processed.
Legal Considerations
In most insurance sectors, it is not illegal for an insurance company to terminate an insurance policy due to a large number of claims on the policy or an increase in circumstances that may make the client a larger financial risk. However, some insurance sectors are undergoing significant reforms that may change this. For example, according to the Rath, Young and Pigtanelli Law Firm, legislation signed by President Barack Obama lifts lifetime benefits limits and makes it illegal for an insurance company to terminate a policy when the provider has paid out a specified amount to the client, effective in 2014.
Wrongful Termination
In some cases, an insurance company may make a documentation or payment confirmation error that results in wrongful termination of an insurance policy. In these instances, it is possible for the insurance client to file a complaint against the company and take legal action to restore the insurance.
Tags: insurance client, insurance provider, insurance company, insurance policy, client insurance
