nothing in life is forever. that includes your small business insurance, which you may need to cancel at some point. if necessary, be sure to follow your insurer’s procedures and submit a written insurance cancellation letter.
when should a business insurance policy be cancelled?
Cancelling a small business insurance policy is never a decision to be taken lightly, especially in today’s risky business environment. It’s important to make sure your business and personal finances aren’t at risk before canceling an existing policy. Do your research beforehand and compare quotes from multiple companies if you plan to replace your policy with something better, cheaper, or more appropriate.
reasons to consider canceling your insurance policy:
- You think you’re paying too much for insurance.
- Your business has changed and you need different coverage.
- You are moving out of state and your current insurer does not offer policies in your new location.
- You are not satisfied with the service provided by your insurer.
- want to combine separate policies into one less expensive combined policy.
- date of notification
- name and address of insurance company
- name of appropriate department and contact person
- name of the insured (found on the declarations page of the policy)
- postal address of the insured
- insured’s phone number
- policy number
- coverage period (on declarations page)
- the date you want your policy to cancel
- a request for reimbursement of unused premiums
- a statement that you no longer authorize the insurer to withdraw funds from your premium payment account (if applicable)
- a request for written confirmation that the insurer will execute your request on the desired date
consider the risks of canceling the insurance
once you decide to cancel your policy, consider four implications for your business:
See also: Understanding GAP Coverage | Ally
Will it expose your business to lawsuits or other costly claims? Canceling your insurance without having a new policy in force means you won’t have a safety net against lawsuits or other costly losses.
will it create a coverage gap by canceling a claims policy? a claims policy may cover events that happened in the past, but you must have ongoing coverage, even if you change carriers This type of policy is often found with errors and omissions, professional liability, and directors and officers insurance, which require you to have active insurance to activate coverage for an insurable event that occurred in the past. If you decide to cancel your policy, talk to your insurer about purchasing optional extended reporting period (ERP) or tail coverage. this feature entitles you to claim benefits even if you have canceled your claims policy.
will it save money but weaken your insurance safety net? it’s important to save money on insurance. but if it comes at the cost of leaving your company unprotected, it can be a poor decision in the long run.
Will adjusting your coverage better meet your needs 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.
do you still want to cancel? send an insurance cancellation letter in writing
If you have a legitimate reason to cancel and it won’t put your business at additional risk, then it’s time to submit a written notice of cancellation. But before you do, check your policy to see if your insurer has cancellation requirements. For example, your insurer may need your letter to go to a specific department, or may require a certain number of days’ notice before they can deactivate your coverage.
Once you’re clear on what’s required, it’s time to write your insurance cancellation notice. your letter should include:
Next, compose the body of the letter. the body should include: