| As
a general rule, a policyholder may elect to cancel an insurance policy
at any time by giving notice to the insurance company. In some cases you
may be required to return the original policy or sign a "policy release",
and of course you will be responsible for any premium earned through the date
of cancellation. Sometimes
there are financial penalties for early cancellation by the policyholder.
Most property and liability policies require what is called a "short
rate" penalty when a policyholder requests cancellation, which means that
the company retains a disproportionate amount of the premium. For example,
if you have a one year policy and you request cancellation after six months,
the "short rate" penalty would allow the company to retain more
than one-half of the annual premium. Also, many types of life insurance policies
and annuities impose "surrender charges" if they are canceled before
they have been in effect a certain number of years. A policy must clearly describe
any applicable cancellation penalties or surrender charges. |
