A cancellation notice tells the insured that the carrier will end the policy before its expiration date. Most cancellations are for nonpayment of premium. Others follow a material misrepresentation, a substantial change in risk, or a failure to meet underwriting requirements such as an inspection.
State law controls the details, and they vary by state and line. Typically:
- Nonpayment cancellations need a short notice period, often 10 days.
- Other reasons need longer notice, often 30 days or more, and after a policy has been in force 60 or 90 days, many states limit the reasons a carrier may cite.
- Who gets it: the first named insured, and usually the agent, lienholders and mortgagees.
Nonrenewal at the end of the term is a different notice with its own rules.
How it shows up in an agency
A carrier’s download drops a “pending cancellation for nonpayment” notice into the AMS on the 3rd, effective the 15th. The CSR calls the client, confirms whether the payment bounced or was never made, and gives the payment link before the deadline. If the policy cancels, the client may lose coverage it needs for contracts or lenders, and reinstatement, if the carrier allows it, can mean a lapse in coverage.
Common confusion
- Certificate holders usually don’t get notified. The standard ACORD 25 says the insurer will deliver notice “in accordance with the policy provisions.” Unless the policy has a notice of cancellation endorsement for that party, the certificate holder may never hear. See our ACORD 25 guide.
- Insured-requested cancellation is different. When the client cancels, the refund may be short-rate or subject to a minimum earned premium.