What does cancellation of an insurance policy mean?

The cancellation of an insurance policy refers to the termination of that policy by either the insured (the policyholder) or the insurance company during the policy period. This can happen for various reasons, such as non-payment of premiums, changes in risk, or the insured's decision to seek coverage elsewhere. When a policy is canceled, it is important to understand that the coverage provided by the policy ends, and the policyholder may not have insurance protection for any incidents that occur after the cancellation date.

This definition clearly distinguishes cancellation from other terms related to insurance policies. For example, renewing a policy refers to extending the coverage for another term, which does not involve termination but rather continuation. Adjusting coverage limits involves modifying existing policy terms without terminating the policy, and transferring a policy pertains to changing the policyholder without affecting the original agreement's validity.

Understanding cancellation is crucial for both consumers and insurance professionals, as it underscores the responsibilities and rights of both parties involved in the insurance contract.