6 Simple Insurance Cancellation Letter Templates

An Insurance Cancellation Letter is an official document that is written by the person or entity that purchased the coverage policy so as to request their insurance company or insurer to cancel their policy. This correspondence should include the policy number, the specific date, and the reason for the cancellation. 

You must write this letter if you wish to cancel your policy. Remember that you might be required to show proof of new coverage before you can terminate your current one. In addition, depending on the agreement you have with your insurance company, canceling your policy before it expires may lead to penalties or fees. 

You need to carefully review the terms and conditions you agreed to before canceling your policy. In this article, you will learn how to write a letter to cancel your policy, how to write it, and tips for writing an effective document.

You can download the following templates for free:

Statistical Insights: A survey conducted by J.D. Power (2020), suggested that about 19% of auto insurance customers changed their insurance company in the past year. Clearsurance also suggested in their study (2020), that 38% of policyholders switched or terminated their insurance coverage in the past 12 months. 

Below are some of the most common types of insurance policies. You need to understand what each type of policy entails before terminating it:

Auto insurance

It is a type of insurance policy that provides coverage for damage to a vehicle and liability for injuries or property damage caused by the insured driver. You may choose to cancel your auto insurance policy for a number of reasons, such as 

• Finding better rates or coverage options with other insurers.
• Selling or no longer owning the insured vehicle.
• Financial difficulties or inability to afford premiums.
• Moving to a location where the current insurer does not provide coverage.
• Non-renewal due to multiple traffic violations or accidents.

Did you know? In 2020, the rampant rise of the COVID-19 pandemic led to many Americans canceling or changing their coverage due to financial strain. A study conducted by MarketWatch in 2021 suggested that the effects of the pandemic increased the number of uninsured Americans by 1 million in 2020.

Homeowners Insurance

This is a type of insurance policy that protects homeowners from financial losses as a result of events like theft and natural disasters. This insurance covers the structure of the house, provides personal property coverage for lost or damaged belongings, and provides liability protection if someone gets injured while on your property.

You can cancel this policy for the following reasons:

• Change in residence, sell the property, or rent a different place.
• Finding more comprehensive coverage or lower premiums elsewhere.
• Financial constraints or inability to afford premiums.
• Dissatisfaction with the insurance provider’s services or claim handling.
• Home renovations or improvements may require a different policy.

Health insurance

Health insurance protects you against financial burdens resulting from medical expenses such as a doctor’s visit, surgery, prescription drugs, and hospitalization. Health insurance coverage ranges from premiums, out-of-pocket limits, and deductibles to co-payments.

You can choose to terminate this insurance policy for the following reasons:

• Inadequate coverage for specific health needs.
• Change in health conditions requiring different coverage.
• Financial constraints or inability to afford premiums.
• Availability of employer-sponsored coverage.
• Dissatisfaction with the insurance provider’s services or network.

Life insurance

Life insurance offers financial stability to the policyholder’s dependents, as they are bound to receive a particular amount of money upon their death or if they are diagnosed with a terminal illness.

You can cancel this policy for the following reasons:

• Change in financial circumstances, making the policy unnecessary.
• Finding more affordable premiums or better coverage options.
• Policy no longer aligns with estate planning or beneficiaries’ needs.
• Dissatisfaction with the insurance provider or agent.
• Purchasing a new policy with different features or benefits.

Note: If the beneficiaries of the policy no longer require the help, the policy has become too expensive due to your age, or you are in good health, you can choose to terminate this coverage.

Disability insurance

Disability insurance can be paid for by different parties, depending on the type of coverage. Many employers in the U.S. offer disability insurance coverage as part of their employee benefits package. In this case, the employer typically pays a portion or the entire premium for the disability insurance. The coverage is provided to employees as a benefit of their employment. These plans are often referred to as employer-sponsored or group disability insurance plans.

Social Security Disability Insurance (SSDI) is a federal program administered by the Social Security Administration (SSA) in the United States. It provides disability insurance benefits to individuals who have paid into the Social Security system through payroll taxes. The funding for SSDI comes from the Social Security Trust Fund, which is supported by these payroll taxes.

Lastly, individuals can also purchase disability insurance policies directly from insurance companies in the U.S. These individual policies are typically paid for by the policyholders themselves. The premiums can vary based on factors such as the individual’s age, health, occupation, and the coverage options selected.

The reasons for terminating this policy can be the following:

• Redundant coverage from other sources.
• Financial constraints or the need to reduce expenses.
• Inadequate coverage for specific needs.
• Change in employment with new coverage offered by the new employer.
• Policy dissatisfaction, including customer service or claims handling.

Long-term care insurance

This insurance policy involves providing coverage for healthcare expenses due to long-term care services. It is designed to help individuals cover expenses related to assistance with activities of daily living (ADLs) or supervision due to chronic illness, disability, or cognitive impairment. Long-term care services can include assistance with tasks such as bathing, dressing, eating, toileting, and transferring, as well as care provided in nursing homes, assisted living facilities, or in-home care settings.

You may cancel this policy for the following reasons:

• Financial constraints and difficulty paying premiums.
• Change in coverage needs no longer aligned with policy.
• Affordability issues due to premium increases.
• Policy dissatisfaction with terms, limitations, or customer service.
• Unused benefits without a need for coverage.

Travel Insurance

Travel insurance is a type of insurance policy designed to provide coverage and financial protection for unexpected events that may occur before or during a trip. It is intended to mitigate the financial risks associated with travel, such as trip cancellation, medical emergencies, lost baggage, or travel delays.

You may choose to terminate this policy for the following reasons:

• Change in travel plans or trip cancellation.
• Redundant coverage from other insurance sources or travel-related programs.
• Limited need for coverage based on the specifics of the trip.
• Policy dissatisfaction with terms, limitations, or customer service.
• Financial considerations, such as excessive premiums or financial constraints.

Business Insurance

This coverage is meant to cover the risk element of your business. This insurance protects you from unexpected financial losses resulting from property damage, theft, or liability lawsuits.

You may cancel your policy for the following reasons:

• Business closure, sale, or change in ownership.
• Change in business operations or risks, rendering the policy inadequate.
• Financial difficulties or inability to afford premiums.
• Dissatisfaction with the insurance provider’s services or coverage terms.
• Obtaining coverage through a different insurer or insurance program.

Pet insurance

This insurance policy entails helping with a pet’s medical expenses, which include unexpected veterinary costs and required treatments. It covers accidents, routine checkups, illnesses, and preventative care. You may cancel this policy for the following reasons:

• Cost considerations if premiums become unaffordable.
• Coverage limitations that don’t adequately meet the pet’s healthcare needs.
• Policy dissatisfaction with customer service or claims processing.
• Changing a pet’s needs requires different coverage.
• The financial burden of insuring multiple pets. 

Statistical Insights: A survey conducted by the National Association of Insurance Commissioners (NAIC) in 2019 discovered that up to 31.6% of consumers cancel or switch their insurer to save money, while 127% do it because of a misunderstanding with their insurance company.

Ensure that you include the following components when preparing your letter to cancel an insurance policy. With these key elements, you will have a proper and detailed letter:

Header

Your letter should begin with a header that is meant to provide your contact information, the specific date of writing, and the address of the insurance company. That means that your header should contain your name, email address, phone number, and mailing address. It should also contain accurate contact information for the insurance provider.

Statement of intent

Start your body section with a statement of intent, which should be brief and straightforward. A clear and concise statement is meant to inform the insurance company about your wish to cancel your policy. This section helps prevent any confusion or misunderstandings between you and the insurance provider.

Policy number

Once you have explained your intention, proceed to mention the policy number. This will make it easier for the insurance company to quickly locate your policy information. That way, they can review the terms and conditions of your purchase and use this information to facilitate the cancellation process.

Effective cancellation date

You also need to include the specific date of your cancellation request. This is the exact date when the changes will be implemented. The effective date for policy cancellation establishes the end date of your insurance coverage. It ensures that you are not responsible for any premiums or claims beyond that date.

Reason for cancellation 

Your letter should include the reason for the cancellation. It is important to clearly and accurately explain the reason for terminating the policy. This can include factors such as changes in coverage needs, financial considerations, or other relevant circumstances. For instance, if you have obtained coverage through another policy or find it difficult to afford the premiums due to financial constraints, it is important to mention these reasons.

Additionally, if you have found redundancy in coverage from other sources or are dissatisfied with the terms or customer service of the policy, briefly expressing your dissatisfaction can be appropriate. Life circumstances, such as a relocation or change in marital status, can also be mentioned as relevant factors. By providing a clear and brief explanation for canceling the policy, you help the insurance company understand your decision and facilitate the cancellation process.

Unused premiums

When canceling an insurance policy, it is important to address the issue of unused premiums. Unused premiums refer to the portion of the premium that has been paid in advance for the remaining coverage period after the cancellation takes effect. It is reasonable to expect a refund of these unused premiums.

In your letter, you can include a request for a refund of the unused premiums. Clearly state that you expect reimbursement for the portion of the premium that corresponds to the period of time beyond the effective date of cancellation. This ensures that you are not financially responsible for coverage you will no longer receive.

A request for written confirmation

Finally, you can request that your insurance company send you a written confirmation of the canceled policy for confirmation and record-keeping purposes. 

Mailing address

Ensure that you include your accurate mailing address, as this is where you will receive all important documents from your insurance company.

Tips: Ensure that you use the avenue approved in the contract when submitting this document. In addition, confirm if you are required to notarize the letter. It is also important to review your contract for guidelines about terminating it. Whether it is by mail, email, or fax, ensure that you have written an effective letter. For record-keeping purposes, use certified mail with a return receipt and keep a copy of the signed letter.

Sample Insurance Cancellation Letter

Two samples of insurance cancellation letter are given below:

To ensure you write a professional letter to request the cancellation of an insurance policy, you need to consider the following tips:

Write in a formal tone

This is an official letter and must therefore be written in a formal tone so as to make it professional. Ensure that you are objective and provide precise details in your letter.

Use a proper business letter format 

Since it is an official letter, you should use a proper business letter format. This means that you should include a header, greeting or salutation, body section, and signature line. Contact information should always be accurate.

Be clear and concise

This letter should not be very lengthy. Ensure that you are brief and concise while providing the details.

Proofread

Always proofread and edit your letter before submitting it to avoid grammar, spelling, and punctuation mistakes. Make sure that the policy number and all the dates are accurate. 

Use a template or consult sample letters

Before writing your letter, find a template that will provide you with an accurate structure for the letter. It will save you time and make your work easier. Also, you should consult sample letters to get an idea of how to write your own.

Keep a copy for your records

Ensure that you keep a copy of the letter for your records before submitting it. It is advisable to retain a copy for future reference in case there are issues regarding the insurance termination.