In general, both insurers and policyholders expect that the policy they are parties to will continue until the end of its term. After the end of the policy’s term, it may or may not be renewed by either the insurer or the policyholder.
However, sometimes situations arise in which the insurer wants to cancel an insurance policy mid-term. Are they permitted to do so without infringing on the policyholder’s legal rights?
Insurance policy cancelation in Nevada
In general, an insurer in Nevada is not permitted to cancel a policy midterm that has been in place for 70 days or more unless the policyholder failed to pay premiums owed, violated the policy or the policyholder lied or committed another fraudulent act when applying for the policy.
Policies can be canceled midterm if there was a material change of risk following the start date of the policy that substantially and materially increased the risk of loss to the insurer beyond what either party could have contemplated when the policy was entered into or renewed.
Absent these circumstances or an agreement between the parties, cancellation midterm might be considered an act of bad faith.
Cancelable insurance policies
However, there are exceptions for cancelable insurance policies. Under these policies, the policyholder or the insurer can cancel the policy midterm.
The policyholder can cancel at any time if a policyholder has a cancelable policy. However, the insurance company must provide the policyholder with advanced notice if they are going to cancel the policy midterm. In addition, they must refund any premiums paid in advance.
Cancelable policies also cover situations if, during the course of the term, the insurer wants to charge considerably greater premiums for the remainder of the term or if coverage limits will be reduced during the course of the term if premiums remain the same.
Non-cancelable policies cannot be cancelled, and premiums cannot be increased during the policy’s term, if the policyholder is making timely payments on premiums. The same can be said for guaranteed renewable policies, except these policies can be raised for the whole coverage group.
Either the insured or the policyholder can choose not to renew the policy at the end of its term. An insurance policy can also contain provisions that expressly state it is nonrenewable.
Nevada law states that policyholders have the right to have their insurance policies renewed for the same term length as their previous policy. However, if the insurer provides the policyholder with timely notice that they will not renew, the insurer is permitted not to renew the policy.