Once a policy is issued, the insurance company, except for reasons stated in the policy or at the policyholder’s request, cannot cancel it, and state laws usually limit what a company can include in the cancellation requirements of its policies. Typically, policies will be subject to cancellation only for failure to make necessary premium payments or for some type of severe misrepresentation or fraud by the policyholder.
Most property and liability policies are issued for a stated policy term, such as one year. The cancellation restriction applies only during the policy term. Insurance companies usually can decide to discontinue, or “nonrenew,” these policies at the end of the term for any reason except a reason that would be prohibited by law. In most states, an insurance company must give the policyholder a written notice at least 30 days before the end of the policy term if the company intends to nonrenew a personal auto or homeowner’s policy.