All too often, policyholders contact us when their residential or commercial carriers send a notice that they will no longer provide insurance coverage. It is critically important that all insureds understand the major difference between an insurance company canceling a current policy and a notice of non-renewal. Every policyholder should carefully study any written notifications about changes or potential changes in insurance coverage so they understand the insurance company’s actions.

Insurance companies cannot cancel a policy that has been in force for more than 60 days unless certain specific circumstances exist. A cancellation of a policy is a termination of the current policy during the period of insurance. The letter detailing the impending cancellation must list each basis and explain what will happen to any unearned premium if the policy was paid in full. Since only certain circumstances can warrant the cancellation of a current policy, be on high alert if you receive a Notice of Cancellation.

The Insurance Information Institute explains how a cancellation is very different from a non-renewal.

A Non-renewal notice is a different matter. Either you or your insurance company can decide not to renew the policy when it expires. Depending on the state you live in, your insurance company must give you a certain number of days notice and explain the reason for not renewing before it drops your policy. If you think the reason is unfair or want a further explanation, call the insurance company’s consumer affairs division. If you don’t get a satisfactory explanation, call your state insurance department . . . . If your insurance company did not renew your policy, you will not necessarily be charged a higher premium at another insurance company.1

When shopping for new insurance, the insurance application will likely have questions about your prior insurance history, and there can be a vast difference in the underwriting evaluation for applicants with non-renewals versus cancellations. Accurately answering these questions is a must. Sometimes, an insurer may have information that indicates the risk may have increased on a property, but this information may be inaccurate. By being an informed consumer and knowing your rights, you may be able to correct the record and stay insured.

In the state of North Carolina, three statutes govern cancellation and non-renewal. In particular, if a cancellation is going to happen during the first 60 days of a policy, the reasons must be specifically stated on the notice, proof of mailing is required, and, depending on the reason for the cancellation, the length of notice required varies from 15-30 days.

If an insurance company seeks to cancel a policy, after the underwriting period or 60+ days into a policy, there are only 10 reasons that an insurance company can use. North Carolina policyholders must act fast because the carriers are only required to give 15 days advance notice before cancellation of a policy (the exception to this rule is 30 days notice if the policy has provided 30 days notice under an ISO endorsement).

Here are the strict rules2 for cancellation in North Carolina for certain insurance policies (proof of mailing a timely notice is required):

  1. Nonpayment;
  2. Act or omission that constitutes a material misstatement or nondisclosure of a material fact;
  3. Increased hazard or material change to the risk;
  4. Substantial breach of contract duties, condition, or warranties;
  5. Fraudulent acts by the insureds or their representatives that materially affects the insurability of the risk;
  6. Willful failure of the insured or their representative to implement reasonable loss control requirements that materially affect insurability after written notice from insurer;
  7. If the insurer losses its facultative reinsurance or a loss of substantial change in applicable reinsurance;
  8. Insured’s conviction of a crime arising out of acts that materially affect the insurability of the risk;
  9. A determination by the commissioner that continuation of the policy would violate the laws of North Carolina;
  10. If the insurer is a fraternal insurer and the insured does not meet the charter requirements.

If you have questions about your current property coverage or a claim, please contact us directly at 877-449-4700.

For more information on North Carolina insurance issues, check out:

1 http://www.iii.org/article/is-there-a-difference-between-cancellation-and-nonrenewal
2 See North Carolina General Statutes Sections 58-41-15, 58-41-20, and 58-41-25, and 2014 Cancellation & Nonrenewal for the 50 States and District of Columbia, by Christine G. Barlow, CPCU.