Can an Insurance Company Cancel Your Policy?

Prices seem to be getting more and more costly for virtually everything nowadays. Most of us wouldn’t be able to afford to receive medical care without health insurance. Not only is it illegal, but it would be cost-prohibitive to operate a vehicle (given the prospect of getting involved in a crash) without auto insurance. And making an investment in buying a home (something that could potentially be destroyed by a fire) wouldn’t make economic sense if it weren’t for homeowners insurance. But what if that policy were to end suddenly? Below, we tackle whether an insurance company can cancel your policy.

When Health Insurance Can Be Canceled

According to HealthCare.gov, insurers used to be allowed to deny you coverage as early as when you completed your application for health insurance. And if you’d already been approved for coverage, they’d be able to not only cancel the policy, but also have you repay any payouts they’d already made up to that point. It’s illegal for health insurance companies to do that just because you make what the federal government refers to as an “honest mistake.”

However, an insurer may cancel a policy if the coverage was obtained fraudulently. In addition to being able to cancel your insurance for fraud, they can do so because:

• You neglect to pay your insurance premiums
• Your marriage is annulled, or you get divorced

In the case of the latter, while you can’t be dropped from an insurance plan your spouse secures from their employer during your separation period, insurers will drop you as soon as your marriage is officially over. You must then secure temporary coverage through a program like COBRA or a more permanent health plan in the health insurance marketplace.

Situations That May Trigger Cancellations of Homeowners Insurance Coverage

A lot of advisory types of news articles that warn consumers about the dangers of having their homeowners policies canceled on short notice pop up during hurricane season and when wildfires seem to be burning out of hand in the West. Just like with health insurance, an insurer can cancel a policy for non-payment or fraudulent activity when applying for coverage or when submitting a claim, but they generally cannot flat-out cancel the insurance for just any arbitrary reason.

See, there’s a subtle difference between a cancellation and a policy not being renewed. They’re not the same. Insurers who are not planning to renew policies must typically give 30-60 days’ notice that they’re not planning to do so. Some of the reasons they might do this include:

• Your insurer quits offering homeowners insurance in your area: This might happen because the risk of the natural disasters described above is too high.
• Home inspection issues: You were asked to perform a home inspection, and your property or structure failed to meet certain criteria.

Making Sense of Auto Insurance Cancellations

Insurers, like auto insurance, do have a lot of flexibility to cancel policies for insureds that don’t pay their premiums, commit fraud, or otherwise fail to adhere to the terms of their policy, such as not reporting an accident within a certain time frame after it occurs. Other situations that may provoke them to send you a cancelation notice provided state law allows them to do so, including if you:

• Lose your driving privileges: This often occurs if you have a medical condition, such as a seizure disorder, that could render you temporarily incapacitated or unconscious and thus unsafe to operate the vehicle.
• Are convicted on DUI charges: Insurers see individuals who are convicted of drugged or drunk driving charges as too high risk to insure and thus may cancel their policy, necessitating them to seek coverage elsewhere.

In addition to the aforementioned, much like homeowners coverage, an insurer may not renew an auto insurance policy because one of their customers:

• File too many insurance claims: They generally up your rates after the first or second accident. Then, if that does not put an end to them, they may send you notice that they’re not renewing your policy.
• Have too many accidents: While it certainly matters more to insurers if you actually cause the accidents yourself, any crashes may raise the alarm and lead to you being classified as high risk, resulting in a non-renewal of your policy.

Options Available to You if Your Insurance Drops You

Even if you receive a non-renewal or cancellation notice for some insurance policies, you may still have options for getting the policy reinstated. This might be the case if a cancellation happened for one of those “honest mistake” issues we mentioned above on an application and even if it occurred due to non-payment. It thus may be worth your while to reach out to an insurer to see if they’re willing to work with you on this end.

Aside from that, in the case of a non-renewed or canceled homeowners policy, whether due to inspection issues or potential environmental or weather risks, you might want to call it to their attention that you’ve made repairs or otherwise reduced risks to your property. For example, if it failed inspection or there was a fire risk due to shrubbery being located too close to the residence, and you’ve since remedied those issues, you might show evidence of that and have your policy reinstated.

While an honest insurer might give your appeal the care and concern it deserves, given how insurance companies are often solely focused on their bottom line, it’s quite possible that they might not give it one thought. That’s when you might want to consider seeking guidance from a lawyer who handles bad faith insurance claims in Las Vegas. That’s what we specialize in at the Law Office of Matthew L. Sharp. We want to help you re-secure your insurance and also recover compensation for any losses you suffered. So, call us for a free consultation with an attorney to discuss your loss of coverage.