People can buy different types of insurance to protect themselves against losses. Common types of insurance include automobile insurance, which protects the driver involved in a crash, and homeowner's insurance, which protects the owner's residence from damage. However, most insurance policies include a clause that allows the insurance company to revoke or cancel the policy. The effects of this termination depend on the type of insurance and the policy's provisions.
When an insurance policy is cancelled, the previous coverage is no longer in effect. The policyholder is no longer allowed to bring claims against the policy. Also, he is no longer obligated to pay premiums on the policy, unless payments are already in arrears. Most policies allow insurance companies to cancel them at will; however, a company is usually required to give the policyholder some advance notice of the cancellation.
When a policy is cancelled, the insurance company usually refunds the policyholder a portion of the money paid on the policy, which is prorated to coincide with the date of cancellation. For example, if a person's year-long policy was paid in advance and then cancelled after six months, he would receive half of the money he paid on the policy. However, if a person causes a policy to be cancelled by violating a term of the agreement, the company may not refund the money.
Getting New Insurance
After a person's insurance policy is revoked, he can appeal the cancellation with his former insurer. If this does not work, he may be able to purchase a new policy from the same insurer. However, the insurer may choose not to offer him another policy. In that case, the person can try purchasing a new policy from a different insurer.
Losing auto insurance presents a special challenge because auto insurance is mandatory. If a driver's insurance is revoked -- as it often is following a drunk driving conviction or other case of severe negligence -- he is not allowed to drive until he has purchased a new insurance policy. For this reason, most states mandate that insurers give advance notice before cancelling an auto insurance policy.