Cancel, nonrenewal have different meanings for insurance
Perhaps you (or someone you know) are among those Floridians who have had the experience of getting a letter from a property insurance company saying it would not be renewing your coverage. And, perhaps, your reaction was to shout something along the lines of, “I’ve been cancelled!” But that’s not what happened. You were not cancelled; your policy was not renewed, and there’s a big difference.
Nonrenewal of an insurance policy means you still have coverage until the insurance contract expires. On the other hand, a cancellation means the coverage ends before the expected expiration date.
A property insurance policy is typically for a one-year term, and after that year passes, either you or your insurer may decide not to renew it. If the insurance company decides not to renew it, Florida statute on insurance contracts requires at least 45 days’ advance notice. The law also requires that you be given a reason the policy won’t be renewed. If the reason doesn’t make sense to you, call the insurance company for a more detailed explanation. And, if that answer raises even more questions or concern, talk to the state’s Division of Consumer Services.
Insurance companies in Florida can only cancel a policy that has been in force for more than 90 days if the policyholder:
- Failed to pay the premium,
- Committed fraud or made a material misrepresentation on the insurance application,
- Had a substantial change in the risk covered by the policy, or
- Had coverage with an insurer that is cancelling all such policies in a given class of insureds, such as if it is no longer handling that specific line of business.
In these instances, the insurer is required to provide 10 days’ written notice of cancellation.
Florida statute does allow an insurer to terminate policies within the first 90 days of coverage. Why would a company do that? Well, just like you might change your mind about a purchase and want to return it, some insurers may decide the same thing. This doesn’t happen very often, but it’s happening right now to some people in South Florida who thought they had coverage with a private insurance company locked in for a year – and then learned otherwise.
If an insurance policy has been in effect for less than 90 days and an insurer decides to cancel the coverage, it must give the policyholder at least 20 days written notice, along with a reason for the cancellation. A reason given in this most recent case is for “exposure management.” Exposure is the possibility for loss, and what the company appears to be saying is that it took on more policies in the most vulnerable parts of the state than what it now deems fiscally prudent. So, it’s invoking a “return policy,” so to speak.