Policies do not always run to their natural expiration. Cancellation is the termination of coverage before the end of the policy term, initiated either by the insurer or the policyholder. The conditions under which each party may cancel are spelled out in the contract and constrained by regulation.

Insurers typically may cancel for non-payment, material misrepresentation, or substantial increase in hazard, often after a required notice period. Policyholders may cancel for any reason, usually receiving a pro-rata or short-rate refund of unearned premium. Mid-term cancellation can leave the insured scrambling for replacement coverage.

Statutes in many jurisdictions limit mid-term cancellation of personal lines policies and prescribe minimum notice periods. Proof of mailing or electronic delivery of the notice is important evidence if the cancellation is later contested. Once effective, cancellation ends the insurer’s obligation for subsequent losses.

• Early termination of an insurance policy
• May be initiated by insurer or insured
• Subject to contractual and regulatory rules
• Affects premium refund and ongoing coverage