An insurance cancellation letter is a letter that notifies an insurance company of our desire to cancel contracted insurance or not renew the current contract. It is a technical, formal document. Most insurers have a format. However, it is also valid that we present that letter requesting the cancellation of insurance. Also, generally, these letters must be exhibited before the insurance company with a period of advance. If possible, have an acknowledgment of receipt, generally in a copy of the letter delivered, which will prove the request was made.
When Should You Cancel Insurance?
It is almost better to say than to do when it comes to canceling a policy, and most people are aware that without it, the likelihood of acquiring a liability is as high as 100%. Canceling an insurance policy is never an easy choice to make, particularly in today’s risky business climate. Before you terminate an established scheme, double-check that your company and personal finances are not at risk.
If you want to substitute your strategy with something different, cheaper, or more friendly, do your homework and match quotes from various carriers. Accidents and unexpected accidents may strike at any moment and without notice, and the liabilities that come with them can devastate your finances. However, sometimes canceling your insurance coverage is preferable to paying annual fees that you don’t think are worthwhile.
Below are some of the situations in which canceling an insurance policy is a better option:
Paying too much on it
It happens when you think you are overpaying for the policy affecting your overall budget and planning. In this situation, you may think to cancel the insurance policy entirely or partially.
Moving somewhere else
As the name suggests, it happens when you are moving out of state, and the insurance company does not offer their services in that particular state.
Unsatisfied with services
If you are dissatisfied with the new insurance provider’s offer, cost, or operation, it is a good enough reason to cancel the insurance.
Changing business
If your business has expanded, shrunk, or modified in some other way, you may need to switch to a new insurance plan or company.
Want policies in an economic policy bundle
You are most likely to cancel your present insurance policy if you discover a more cost-effective insurance plan with better security and coverage.
Points to Ponder Before Canceling Insurance
An insurance plan protects you by providing financial assistance if any unforeseen event or an accident occurs. Therefore, few things must be considered before the insurance cancellation:
Exposing your business to lawsuits
You will expose your business to lawsuits if you cancel your insurance policy you. It can happen if an unforeseen accident happens or someone files a complaint against you. So, it’s recommended to find an alternative insurance policy before cancelling the insurance plan.
Saving money but reducing insurance safety net
It is vital to save money on the insurance plan. However, if it comes at the expense of keeping your business vulnerable in the long term, it could be a flawed idea.
Coverage gap
Even if you change providers, you should have adequate coverage because a policy claim could cover events that previously happened. This type of policy is frequently associated with inconsistencies, legal fees, and compensation for shareholders and others. It requires you also to have active insurance to trigger coverage after a reimbursable event that has previously happened.
Coverage adjustment as an alternative
In some circumstances, you would be able to customize your coverage to meet your needs without canceling your policy. You will be able to adjust your protection to suit your present conditions if your market order has changed or whether you have relocated, for example.
How to Write (What to Include?)
The insurance cancellation letter is both a formal letter and a legal document, so it must comply with more formalities than a standard letter.
Following are some of the key components of an insurance cancellation letter:
Subject
The purpose of the subject line is to specify that what we are addressing is an insurance cancellation letter. The type of insurance that we are canceling will be indicated, especially when we have more than one contracted.
Date of notice
It is the date you, as the insured client are sending the cancellation letter as a notice to the insurance company.
Information of insurance company
In this section of the letter, the name and physical address etc of the insurance company are mentioned. This component ensures that you are reaching out to the right company and enhance the credibility of the letter in terms of professionalism and format as well.
Department and employee addressed
This component serves to indicate a particular department’s name and the name of contact person who sold you the insurance plan or the sub-directorate in charge of our insurance or the head of the area.
Insured’s name
The name of the insured person (i.e; you) indicates the person who has bought an insurance plan from the company.
The insured’s mailing address
It indicates the physical mailing address of the person who has bought an insurance plan from the company.
Contact number
The phone number of the person who has bought an insurance plan from the company (i.e you) must be included so that the company may have multiple sources of reaching out/responding to you.
Policy number
It indicates the insurance company’s policy number at the time of purchase of the insurance policy.
Insurance type
The kind of insurance you had bought must be included in your insurance cancellation letter
Coverage period
The coverage period is the period of time during which the insurance policy will still remain valid before cancellation.
Signature
It is always requested that the signer be the owner of the insurance. In case you cannot do it, a power of attorney is required, which will be attached in original or certified copy, and in the place of a signature, the letters PA (which means “by authorized”) and the applicant’s signature.
Key Points to Consider
Canceling an insurance policy involves many legal aspects that you should cover to avoid any lawsuits in the future.
Following are the key points of drafting the insurance cancellation letter that you need to consider:
Date of canceling the insurance
The first thing that you should keep in mind while drafting an insurance letter is to mention the date when you want to cancel the insurance not to have to pay extra.
Refund for unused premiums
If premiums are paid and not collected, which is called the return of premiums, an account number will be indicated to deposit them and the account holder’s name. You must remember to request these unused premiums incase any of them have not been provided to you.
Statement of prohibition for the insurer
It would be best if you kept in mind while drafting a cancellation letter to make a clear statement prohibiting an insurer from withdrawing funds.
Written confirmation of cancellation
The last thing you need to consider is requesting the insurer to provide written confirmation that the policy will be canceled by the due date.
Why Stay Insured During Crises
To make sure that your interest is safeguarded, even during a crisis, here are few reasons why you should keep an insurance plan as your crisis management strategy:
Worker compensation: If an illness epidemic occurs, such as the flu, your employers may turn to you to cover their salaries as well as any medical expenses that may arise. For all kinds of injuries, having insurance in place during a disaster is a must.
General liability claims: Since lawsuits do not generally have a time limit, you must keep your liability coverage in order during some crisis. People will always get injured on your property, and if you continue to do business online, you’ll need this valuable insurance policy in the event of any claims.
Director insurance claims: Whether you have a board of directors, they can most likely continue to function during a crisis or natural disaster. That ensures you will also need to supply directors and officers with liability protection to protect their personal belongings.
Employment practice liability claim: They will most likely continue to run during a war or natural disaster, and they can operate remotely, regardless of if you have board members. As a result, you’ll need to provide directors and officers with liability insurance to cover their personal property.
How to Save Money without Insurance Cancellation
If you need more disposable income and want to save money on premiums without canceling the insurance policy, it is possible by following many different tips:
Lower your coverage: Though it is not always recommended, you can lower your coverage to save more on insurance.
Increase deductibles: One more way to save money without canceling the insurance policy is by increasing the deductibles, which will lower the cost without changing the general level of coverage.
Reduce payrolls on worker’s compensation: Another method to save money without canceling your insurance policy is to reduce the workers’ work hours, which will lower their compensation. You can increase the amount later.
Make sure insurance coverage stays active: The last tip for saving money without canceling an insurance policy is to ensure that you have an alternate coverage policy to safeguard yourself if there is any lawsuit.
Sample of Insurance Cancellation Letter
ABC
March 9, 2021
XYZ Insurance Corporation
Life Insurance Office
ABC with life insurance policy number 139214, I have come to request the cancellation of my insurance.
A cancellation that I request for hiring comprehensive coverage insurance offered in my workplace by the center’s insurance company is more advantageous than the one I had previously contracted. And given the difficulty of covering both premiums, I have come to request the cancellation.
Thank you in advance for your attention and understanding of this situation.
Name
Signature
Download Free Templates
Now that you know what an insurance cancellation letter is and how it is drafted, we offer a professional cancellation letter template that you can download for free.
Frequently Asked Questions
How long does an insurance cancellation stay on record?
Five years is the time during which insurance cancellation should stay on record.
Do I get a refund if I cancel insurance?
It depends on your particular situation, but you may get a refund if you have paid premiums.
Conclusion
If you need to cancel an insurance policy for some reason, make sure you consider your situation, follow the insurer’s policies, and submit a signed cancellation letter.