Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 4 minutes
If you’ve ever opened a renewal notice with sweaty palms, keep reading. Insurance can be unpredictable. That’s the nature of the business.
It protects you…unless it doesn’t
Even if you have a policy in place. Even if you have a policy that protects you, you may not be safe. Or protected.
Insurance companies can cancel your policy. Mid-term exam. That’s not an exaggeration.
I’ve pulled a few businesses off the ground in my time. Seen all types of insurance mishaps and disclaimer letters. It’s not the end of the world. With the right help, of course, you’ll be fine.
Yes, we know that it can be easy to feel very overwhelmed in these situations. You’ve been a responsible business owner. You knew that coverage was in your company’s best interest. But now you’re out of luck. It feels like a betrayal that can hurt. You may not know what to do next.
Take a look at the article below to understand why these things happen. If you know why they happen, it’s possible to avoid them altogether. And if they do happen to you, we can help you find new coverage. So take a deep breath and read below.
Mid-Term Cancellations Happen
It doesn’t matter if you have a policy. If you don’t hold up your end of the bargain, it will get cancelled. It doesn’t matter if you’re a good person. Or if your business works with those in need.
Insurance is a contract. There are rules.
1. Non-Payment
This is the number one reason, hands down. If you don’t pay, say goodbye to your policy. Insurance companies need premiums to stay in business. If you don’t pay, neither will they.
Policy gone.
2. Misrepresentation
This one bites people who think “rounding the truth” is harmless. It’s not. If you misrepresent your business operations, you may be shopping for coverage.
Or something else.
They may not cancel your coverage. But they won’t protect you if you get sued in a line of work you didn’t disclose you were in. You’ll have to hire a personal attorney to defend you. That will probably cost more than the premiums you would’ve paid if you had disclosed your business’s true nature as you should have.
3. Major Claims
Major claims result in significant losses for insurers. They are there for worst-case scenarios. That’s true. But if the worst-case scenario is way worse than they anticipated, they will jump ship. Policy cancelled.
It doesn’t matter that you paid on time. Check your contract. If they start losing money or if a large claim means you’re no longer profitable for them, they’ll cancel. Not fair, but true.
4. Changes
Changes can make you riskier. Switching from painting to scaffolding? Home design to demolition? Your coverage may not be there for you. Or, it may be way more expensive than before.
All things to keep in mind before shaking up your business model.
5. Many Small Claims
Small claims can wack the insurer upside the head. That is, if there’s enough of them. Especially in a short time period. It signals a pattern. And patterns make actuaries twitchy. Patterns mean payouts.
Workers’ comp carriers especially hate repetitive injuries. A 2023 OSHA review found that the average U.S. small business experienced 1.5 recordable injuries for every 100 full-time employees.
Insurers know these numbers. And they’ll hold you to them. Too many claims will ring the fire alarm. Only it’s your policy going up in flames.
6. Inspectors
Remember those hall monitors in middle school? If you didn’t have a pass, you were getting detention. Insurance has its version of hall monitors.
They are called auditors. They come by to check your site. If things are unsafe, if there are violations, if there is unreported work going on, you’re in trouble.
7. License Troubles
If the state suspends something essential to your operation, insurers pull out. Think of a bar losing a liquor license. An auto body shop has had its inspection license revoked.
If you can’t get licensed, what’s wrong with your business? If you lost a license, did you break a law? Are your operations skirting a legal gray line?
Not my thoughts, the insurance company’s. If things seem fishy, they may swim away from coverage.
A Word From Me — and Why We Can Help
Don’t feel bad if your coverage is cancelled. Mid-term, end-of-term. We got you covered.
We’ve helped people in these situations many times. We can get your coverage back on track.
