Don’t Let Your Insurance Company Cancel Your Policy for These Main Reasons!
Whether it is a car, health, or homeowner’s insurance, the insurance company could cancel your policy, but… is that possible? Is that even legal? If so, what would be the reasons for a policy to be canceled?
You should remember that insurance companies are businesses, therefore, they are always looking after for their best interests, not yours. It does not even matter what the adjuster says! Hence, it is important that before buying a policy, you must read the terms and conditions very carefully, otherwise, you could end up in an unfortunate situation.
There are five main reasons for an insurance company to cancel your policy:
Too Many Claims
How many claims are considered “too many” for your insurer? Sadly, there is no accurate scale that can determine whether you filed “many” or “few” claims to your insurance company. But we suggest that you ask yourself the following questions to assess yourselves of having “too many” claims:
- What was the value and nature of each claim?
- Were the claims related? Or were independent of each other?
- Did the claims occur in the same place? (in the case of homeowner insurance)
- Has anything changed that makes you less susceptible to danger? For example, you changed your diet or you started exercising; you repaired your house, improved the alarm system, or changed a damaged piece in your car.
House in Repair that Needs Maintenance or Renovation
Your insurance company could cancel your policy if you decide to ignore its recommendation to make some repairs. These suggestions could be the result of different inspections due to safety problems, prevention, or liability.
Recommendations are given based on the answers you gave, or even the commitments you acquire when you buy the policy. Remember that insurance companies are businesses and they do not want to lose money ensuring your house if you have old plumbing or mold on the walls.
If you file a claim in the past, it is logical that the insurance company wants you to take the necessary measures to avoid any possible disaster and lose more money because of you.
Failure to Pay the Policy or Too Many Overdue Payments
Did you lose your job or did you forget to pay several monthly payments for your insurance? These are normal situations that could cause many problems and conflicts with your policy. If you accumulate multiple overdue payments, your insurance company will most likely threaten to cancel the policy.
If the insurance company has really canceled your policy, you will have problems finding a new insurer because your insurance credit score will be decline.
If you have the chance to negotiate with the company to avoid policy cancellation, do it! If you don’t need or want the insurance anymore, you cannot break the contract by dodging payments. You accepted terms and conditions that have to follow because not doing so can arise to legal problems in your favor.
Criminal Records, False Declarations, or “Moral Risk”
The term “moral risk” is used in situations in which a person or entity takes advantage of another when he/she realizes that he/she cannot take legal responsibility for his/her actions that could be morally unacceptable.
To be considered a moral hazard, 3 situations must arise:
- There is asymmetric information. One part of an economic transaction possesses greater material knowledge than the other party.
- There are different incentives for a transaction to take place. Each of the parties in a contract has different incentives for the agreement, which are not communicated.
- There is a possibility that the risk will be transferred elsewhere. People are not held responsible for their decisions and/or actions and pass risks to insurance companies.
Material Change in a Risky Situation
The material change could be defined as a substantial and continuous change that affects and increase the risks of insuring your property. If you don’t inform your insurance company of this situation, they are entitled to:
- Cancel the contract, following the Legal Conditions, or
- Notify you in writing that if you want to keep the contract in force, you must make an additional premium payment within 15 days after notification.
Examples of Material Change
- Change of use of your vehicle (from personal to public transportation or business use)
- Additional drivers using your vehicle (children obtaining their Class 5 license)
- Making modifications or alterations to your vehicle
- A change in the owning of the house
- Running a business from home
- Having tenants or guests residing in your home
- Big renovations to your home
- Rent your house
How to Avoid the Insurance Company In Cancelling your Policy
Remember that if your policy got canceled, finding a new insurer will be a huge problem for you. Sometimes, you might have to pay more for the same policy in the long run because your insurance credit score has been damaged.
Luckily, in some cases, even when insurance companies have the intention to cancel your policy, negotiating properly can make them change their mind. Here are some ideas that may be useful:
Loyalty is Important for Insurance Companies
While every company may be different, it won’t hurt to show them how stable and loyal you are. This is particularly helpful if you were insured for many years before the unfortunate claim incidents and you had no issues with your insurer before that.
Show your Value to the Insurance Company
You must remind your insurer that you are more than the money that they are losing. You are far more valuable than that. They had great profits because of you and they will continue to receive so if they are to continue with your policy. Some points that you should emphasize are:
- How long have you been with the insurance company? Use it to convince them.
- Calculate the premium that you have paid them over the years. Not just for the policy in question but all the others. For example, add up the policies of your home, your automobile, commercial, etc.
- Have you recommended them to your friends or family? Make sure to point it out as well. Everything helps.
- Let them know that you are willing to take a higher risk by taking a higher deductible if you can.
The most important thing is to secure that your insurer sees your commitment to the contract and your sincerity to not violate it again.
In case you have any questions, do not hesitate to contact us. Remember that at Farahi Law Firm, we are available 24/7. Call us at (844-244-2955) in case you or one of your loved ones suffers an accident. We are specialists in personal injury. We are here for you!