Insurance policies can be cancelled for a variety of reasons, either by the customer or their insurance company, depending on the circumstances. If you’re wondering how you can prevent a policy cancellation, take a look at the top three reasons why an insurer might put an end to your coverage:
- You didn’t pay your premium. This one is pretty simple. You wouldn’t stop paying your hydro bill and expect your lights to stay on, so why expect your insurance company to keep you covered if you stop paying your premium? Non-payment is, by far, the most common reason insurance companies cancel policies.
- You’re no longer eligible for coverage under your existing policy. If there’s been a change in your situation and your current policy is no longer able to provide the coverage you need — or if you no longer meet your insurer’s eligibility criteria — your policy could be cancelled. Sometimes these cancellations are in your control, and sometimes they’re not.
For example, if you wrack up too many traffic tickets (a situation in your control), you may find that you’re no longer eligible for “standard” car insurance and your existing policy could be cancelled. Your insurance broker would then help you find new coverage with a company that provides car insurance to high-risk drivers, like Perth Insurance.
On the other hand, if your insurer is only able to cover homes worth $2 million or less, but inflation bumps your home’s value up to $2.5 million (a situation beyond your control), your insurer can no longer provide you with the coverage you need, so they’ll likely have to cancel your policy.
- You didn’t tell your insurance company about a material change. In the insurance world, a “material change in risk” is any change in your circumstances that could impact your eligibility for coverage or alter the type of coverage you need — in other words, it changes the nature of the risk your insurer is taking on by providing you with coverage. A material change could be anything from changing your home’s heating system to signing up for a vehicle sharing program. If you fail to report a material change to your insurer, your policy could be cancelled.
So, what happens after your policy is cancelled?
For starters, a policy cancellation could result in a lapse of coverage, meaning you won’t have insurance until you find a new provider. This could affect your mortgage (insurance is often a condition of financing) and it’ll be pretty inconvenient if you’re hoping to get behind the wheel any time soon — remember, it’s illegal to drive without car insurance. A cancellation could also lead to trouble when you’re shopping for a new insurance provider, and you may find yourself hunting for high-risk insurance, which usually comes with a higher price tag than a standard policy.
To prevent a policy cancellation and keep your coverage, be honest on your application and upfront at renewal time, always pay your premium on time (some insurers allow online or pre-authorized payments to make sure you never miss a bill), and inform your broker about any changes to your circumstances as soon as they come up. If you have any questions or need to make a change to your coverage, reach out to your licensed broker today.