The termination of an insurance policy before its expiration date, initiated by either the policyholder or the insurer. Insurers may cancel a policy for non-payment, fraud, or a significant increase in risk. Policyholders can cancel at any time, though a short-rate penalty may apply.
Related Terms
Grace Period
A set amount of time after a premium due date during which you can make a late payment without losing coverage. Grace periods are typically 10 to 31 days depending on the type of insurance and state regulations.
Lapse
The termination of an insurance policy due to non-payment of premiums or failure to renew. A lapsed policy provides no coverage. Reinstating a lapsed policy may require a new application, medical exam (for life insurance), or evidence of insurability.
Non-Renewal
An insurer's decision not to renew a policy at the end of its term. Unlike cancellation, non-renewal happens at the natural expiration date. Insurers must typically provide advance notice (30 to 60 days) and may decline to renew due to excessive claims or increased risk.