Cancellation, nonrenewal, and policy lapsing are distinct ways in which health insurance coverage can be terminated, each having its own consequences. This guide clarifies why an insurance company might terminate coverage, defines these terms, and explains their impact on policyholders.
Health insurance cancellation
Canceling your health insurance is important because keeping it when you don’t need it can be costly. It allows you to find better coverage or save money on premiums.
When your health insurance gets canceled, it means your insurer has decided to stop covering you and your health, usually for an important reason. This can happen only in a few specific situations.
Once a health insurance policy is purchased, the insurer cannot cancel it unless the policyholder doesn’t pay their premium or has committed fraud or serious misrepresentation during the application process, within 60 days. There is no provision for canceling the policy after this timeframe.
For example, If the insurance company finds out that a customer used someone else’s name to apply for a policy, they can cancel that policy.
Insurers may cancel a policy if the person’s health worsens and becomes a higher risk than what they are willing to cover.
When an insurance company covers someone’s health, and that person makes significant changes that make their health unfeasible to insure according to the company’s judgment, the policy will be terminated.
Cancellation in Specific Situations
If you have health insurance through your employer, you may need to follow a different process to cancel it. Reach out to your HR department or benefits coordinator to find out how to cancel your coverage. Employer-based plans often have specific times when you can cancel or require a valid reason, like losing your job or going through a major life change.
When it comes to canceling individually purchased health insurance plans, there are general guidelines to follow. However, state-specific laws may also apply, so it’s important to research and understand the regulations in your area. Seek help from your state’s insurance department or a professional insurance agent if needed.
If your health insurance company finds out that your place of residence is empty, they may cancel your insurance. Many health insurance policies state that policyholders must inform their insurer if their place of residence is empty for 30 days or longer. Empty residences are more vulnerable to crime and may result in higher insurance claims.
For example, if a fire breaks out in an empty building, there is no one to stop it or call for help. Consequently, the building is likely to burn down completely and be completely destroyed.
Vacation homes or secondary dwellings, which are occupied for only a few weeks annually, have higher insurance costs due to their limited usage.
In most states, companies must legally provide a written notice to policyholders at least 30 days before canceling their insurance. Regardless of your plans to contest the cancellation, take this opportunity to seek a new health insurance policy. It’s important to avoid any gaps in coverage.
When insurance policies are canceled, it can be difficult to find new coverage. If you’re unable to get insurance from regular companies, reach out to your state’s insurance department. They can provide a list of assigned risk carriers who offer insurance to those in similar situations.
Failed Renewal of a Health Insurance Policy
A nonrenewal of health insurance occurs when either the insurer or the policyholder decides not to continue the policy when it ends. This can happen for various reasons and involves fewer limitations than a cancellation.
For example, sometimes, insurance companies may refuse to renew a customer’s policy if they have made many claims during the coverage period. Although this may appear unfair, insurance companies cannot sustain excessive payouts. If an individual keeps filing numerous claims, the company may suffer substantial financial losses, leading to a nonrenewal decision.
If you unintentionally cause significant damage and file a couple of big claims, your insurance company may decide not to renew your policy.
If you have a habit of forgetting to put out candles and have caused two major fires, an insurance company may choose not to renew your policy.
If an insurer receives liability claims, they may choose not to renew the policy.
Dog bites account for over one-third of liability claims in health insurance. Policies may not be renewed if a person’s dog has bitten multiple individuals, leading to claim submissions.
Sometimes, companies may choose not to continue a policy instead of canceling it. For example, if a policyholder has a habit of paying late, their insurance company might decide not to renew their policy.
A nonrenewal can happen when a company no longer provides a product or service in the policyholder’s location. Whether the policyholder has a good standing or not, the business strategies of insurance companies can lead to nonrenewals.
Insurance companies must provide written notice of non-renewal before a policy’s expiration. This gives policyholders time to find a new insurer and avoid any coverage gaps. The specific timeframe differs by state, but typically it is around 45 days.
When your health insurance policy lapses, here’s what you should do next.
Health insurance policies usually end when a policyholder fails to make their payments on time. If a payment is missed, companies typically provide an additional 30 days of coverage before the policy ends.
It is crucial to avoid letting your health insurance lapse for multiple reasons. The primary one is that you won’t have sufficient protection. Health insurance goes beyond just covering medical costs; it also safeguards your personal belongings, provides liability protection, and covers living expenses in case your health is compromised.
Not renewing your health insurance policy can lead to significant financial burdens and additional risks. Most individuals who obtained health through a mortgage lender must purchase health insurance as it safeguards the lender’s financial investment in their well-being.
If the policy lapses, the mortgage lender will get another insurer to cover the policyholder’s health. It’s important to avoid this situation because the policyholder will have to pay for the new policy, which is often more expensive and may not provide sufficient coverage.
For example, a lender-forced policy may only protect the physical house and not the personal belongings within it, as lenders are not concerned about the value of a person’s possessions.
If you let your health insurance coverage end, it may be difficult to get a new policy from a different insurer, although not as challenging as for those whose policies were canceled. If your health insurance has expired, contact your agent or company right away to see if they can reinstate it.
In summary
Canceling your health insurance is important when you no longer need it or want to switch providers. Knowing the legal requirements can help you navigate the process smoothly and meet your obligations. By following these guidelines, you can have a hassle-free cancellation, saving time, money, and future complications.