Cancellation of an insurance policy typically occurs when the policy holder fails to uphold their end of the contract or a breach of contract has been discovered. The most common reasons for a policy cancellation are failure to pay a scheduled premium or fraud and misrepresentation. Insurance regulators in many states limit the ability of an insurance carrier to cancel a policy or discontinue

coverage on an issued insurance policy. Cancellation provisions included in a contract are also, often, limited by State regulators.

Policy Terms and Policy Renewals

Property and liability policies are issued for a policy term or a specified period of time. Cancellation provisions for a given policy only apply during the policy term. Insurance carriers decide, near the term end, whether to discontinue or renew the policy. With the exception of reasons associated with protected classes (groups protected by constitutional law from discrimination) an insurance company can decide to not renew a policy for any reason. If an insurance carrier decides not to renew a homeowners or renters insurance policy,
Written notification of a policy cancellation is typically provided or is required to be provided in most states.

When you enter into an insurance policy you are entering into a legally binding contract. Policyholders or “the insured” makes specified payments to the insurance company or “the insurer” on a regular basis. These contractual arrangements, between an insurance carrier and the insured, compensate a person or party for damages or losses to a specified insurable interest. Payment arrangements for insurance policies can be arranged on a monthly, quarterly, annually or other schedule as determined by the contractual arrangement. Loss coverage and specific terms, conditions, exceptions and exclusion, as well as the definitions for terms and usage in the policy are all specified in the policy jacket, or contract. Items or situations not covered in an insurance policy are known as exclusions; exceptions are also commonly used to modify exclusions or coverage by spelling out certain conditions wherein an exclusion or coverage might or might not apply.

Do State Laws Require Home Insurance?

Unlike car insurance or proof of financial responsibility, which is now required in every state in the US, there are no state mandates dictating that a homeowner must secure a homeowners’ insurance policy. And, while there are no legal or civil guidelines requiring insurance, lenders, banks and financial institutions will require a borrower to maintain an active home insurance policy. Lenders will expect a homeowner to maintain a policy which provides enough insurance coverage to rebuild a home in the event it is destroyed. Lenders require this coverage in order to protect their considerable interest in the property up until the point the loan is repaid. A homeowner who owns his or her property outright, would not be required to maintain an active home insurance policy, although not doing so would put the homeowner at unnecessary risk of loss should someone have an accident or sustain an injury on the property.

Some State Insurance Regulations, like those in place in Texas, cannot require homeowners to maintain an insurance policy beyond the coverage to replace personal belongings and replace the structure in the event of a total loss, regardless of the total loan amount of the mortgage.

What’s Covered by My Insurance Policy?

Most homeowners insurance policies include both property and liability coverage. The liability portion of a homeowners policy will provide specified financial reimbursement to the homeowner, or the insured, if a judgment is made against the insured for damages. Reimbursement amounts are specified in the policy and will, along with premiums, determine the annual cost of a home insurance policy. Liability coverage covers medical costs, up to a specified amount, and legal expenses incurred as a result of someone being injured on the premises. Laws don’t typically preclude a burglar from filing a lawsuit in the event he is injured while robbing your home, so liability insurance coverage would prove mighty handy when your Rottweiler decides to take a chunk out of the guy intending to steal your television at 3 am.

Property coverage repairs, rebuilds or otherwise compensates policy holders for naturally sustained damage or loss caused by events such as fire, fallen trees or heavy winds. Property coverage will also compensates the insured homeowner for the loss of personal belongings and real property damaged or destroyed by events or lost through theft.