How to write an insurance cancellation letter

Consider the risks of canceling insurance

Once you decide to cancel your policy, consider four implications for your business:

Will you expose your business to lawsuits or other expensive claims? Canceling your insurance without having a new policy in place means you’ll have no safety net against lawsuits or other expensive losses.

Will you create a coverage gap by canceling a claims-made insurance policy? A claims-made policy can cover events that happened in the past, but you must have continuous coverage, even if you switch carriers. This policy type is often found with errors and omissions, professional liability, and directors and officers insurance, which require you to have active insurance to trigger coverage for an insurable event that happened in the past. If you decide to cancel your policy, talk to your insurer about purchasing an optional extended reporting period (ERP) or tail coverage. This feature gives you the right to file for benefits even though you canceled your claims-made policy.

Will you save money but weaken your insurance safety net? Saving money on insurance is important. But if it comes at the cost of leaving your company unprotected, it may be an unwise decision in the long run.

Will adjusting your coverage meet your needs better than canceling your policy? In some cases, you may be able to adjust your coverage to meet your needs without canceling your policy. For example, if the nature of your business has changed or you have moved to a new location, you can potentially modify your coverage to reflect your new situation.

Still wish to cancel? Send a written insurance cancellation letter

If you have a legitimate reason to cancel and it won’t subject your business to extra risk, then it’s time to file a written cancellation notice. But before you do, check your policy to see if your insurer has any cancellation requirements. For example, your insurer may need your letter to go to a specific department, or it may require a certain number of days’ notice before it can deactivate your coverage.

Once you’re clear on what’s required, it’s time to draft your insurance cancellation notice. Your letter should include:

• Date of notice
• Insurance company name and address
• Appropriate department name and contact person
• Insured’s name (found in the declarations page of the policy)
• Insured’s mailing address
• Insured’s phone number
• Policy number
• Coverage period (on declarations page)

Next, draft the body of the letter. The body should include:

• The date you would like your policy to be canceled
• A request for a refund of unused premiums
• A statement that you no longer authorize the insurer to withdraw funds from your payment account for premiums (if applicable)
• A request for written confirmation that the insurer will execute your request by the desired date

Compare new policies for your business with Insureon

It’s a good idea to shop the market periodically to see if you can save money on your business insurance, but don’t do it too often. If insurers see that you switch companies every year, they may decide not to cover you, or they may increase the premium they charge.

Insureon has helped thousands of small business owners compare multiple quotes from different U.S. carriers at one online destination. Start a free online application today to save time shopping for insurance.