Can My Life Insurance Company Cancel My Policy Without Notice?

Posted on Jul 21, 2015


For many people, life insurance policies are a critical part of planning for the financial security of other family members. After time passes, an insured person may develop an illness that will make it more difficult or even impossible to replace a terminated policy with affordable coverage. Also, rates tend to increase as people age, so a policy taken out years ago is bound to be cheaper than a similar one purchased today. For these reasons and more, some people have concerns about having their life insurance terminated, and this is particularly true if they do not have any notice to give them time to react.

Can Insurers Cancel Life Insurance Policies With No Notice?

Almost everything to do with life insurance gets regulated at the state level. Regulations in different states vary somewhat. However, it is safe to say that insurance companies can only terminate a life insurance policy forcibly and suddenly for very few and rare reasons. In most cases, they must offer notice.

Cancellation for Nonpayment

In every state, insurance companies have to notify policy holders of missed payments. The company must also offer a grace period that gives the policy owner time to catch up. Typically, this grace period is about 30 days. Life insurance companies cannot allow their customers to miss a payment, neglect to notify them, and then use that as a reason to refuse to pay benefits later.

Some insurance companies may allow policy holders to reinstate their insurance after the grace period has elapsed even if they aren’t required to by law. Typically, they will charge some sort of reinstatement fee and require the policy owner to catch up on all missed payments.

Termination for Material and Fraudulent Application Answers

Insurers can forcibly and abruptly terminate coverage if an applicant supplied answers that were both fraudulent and material. For example, if an insured develops mesothelioma, a rare and deadly lung cancer, an insurer is not likely to get off the hook for paying benefits because the applicant understated his or her weight by twenty pounds. However, if the applicant died in a car wreck that he or she caused while driving under the influence of drugs or alcohol and dishonestly answered a relevant question on the application about prior DUI convictions, the insurer is likely to balk at the claim.

End of Term Life Insurance Contracts

Term life insurance policies last for a specified number of years. Unless the policy is guaranteed renewable, once this term ends, life insurance companies are not obligated to renew the policy and coverage may end. Companies can refuse to renew typical term life for just about any reason as long as it is not a reason that is prohibited by law. Since the policy owner should know how long the term is before buying the policy, an insurer may not have to offer notice.

With that said, life insurance companies will usually send their customers a notice when policies are close to their natural termination and offer either a renewal or another type of coverage. It’s only good business for insurers to attempt to retain their customers. However, unless the prior policy was guaranteed renewable without evidence of insurability, the company could require a new application, physical, or other health underwriting.

What Can You Do If Your Policy Was Terminated Without Notice?

If you believe your policy was unfairly canceled without notice, you should be aware that insurance is one of the most highly regulated industries. If you cannot resolve the situation with the company, remember that your state insurance department exists to protect consumers, and you should contact them to see if they can intervene. If not, your next step might be to speak with an attorney.

Contact us today at Otterstedt Insurance Agency at 201-227-1800 to learn more about life insurance.

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