Receiving a letter from the insurance company concerning the status of your policy can be confusing if you are unfamiliar with the language. Though it may be unfamiliar, it is important that you understand the difference between a cancellation of your policy and a nonrenewal. These terms are vastly different and require different responses on your part.
Nonrenewal
A policy nonrenewal occurs after the insurance company decides, or after you decide, not to renew your policy when it expires. If your insurance company decides not to renew, they must give you adequate notice based on the laws established in your state, and their notice must outline the reasons as to why they have chosen not to renew your policy for another year. If you think their reasoning is unjust, you may call the insurer for further explanation.
Here are some reasons why your policy may not be renewed:
- The insurer does not carry that particular line of coverage any longer.
- The insurer has decided to write fewer policies under that specific line of coverage in your area.
- Your company committed an act that raised the insurer’s risks significantly (i.e., too many claims during a policy period.)
Cancellation
Cancellation of a policy is slightly different, as are the laws that govern it. Be aware that your insurance company cannot cancel your policy that has been in effect for more than 60 days except under the following conditions:
- You did not pay your premium.
- You have committed fraud.
- You have made serious misrepresentations about your company on the application.
If your policy is going to be cancelled, you will receive notice well in advance. After a cancellation, it can be difficult to obtain a new policy, as other companies may see you as a risk because you did something to get cancelled from your original insurer. If you do receive a cancellation notice because you failed to pay your premium, you may be able to resurrect your policy with the insurer by paying for an entire year’s worth of premiums upfront. If that is not an option for you, then you may have to opt for a high-risk policy.
Understanding cancellation versus nonrenewal can be tricky. Contact GRBM Insurance for more explanation on these concepts or for assistance with your commercial insurance policies. We are always available to help.
