What is a Cancelation? - Insurance Navy. In insurance, a cancellation refers to terminating an insurance policy before its expiration date. This can occur for a variety of reasons and can be initiated either by the policyholder or the insurance company. When initiated by the policyholder, it could be due to reasons such as finding a better policy elsewhere, no longer needing the coverage, or inability to continue paying the premiums.
The policyholder must typically provide a written cancellation notice to the insurance company. When initiated by the insurance company, it could be due to reasons such as non-payment of premiums by the policyholder, fraud or misrepresentation on the policyholder’s part, or increased risk associated with the policyholder. Depending on the jurisdiction and the policy terms, the insurance company may be required to provide a notice period before the cancellation takes effect, giving the policyholder time to find alternative coverage.