Issues to Watch For When Renewing Insurance Policies
Most insurance companies let you "automatically" renew an insurance policy, but you should still be mindful of important issues that can arise even when policy renewal is automatic or routine.
Can Your Insurer Refuse to Renew Your Policy?With wildfires, hurricanes and mudslides in the news, a common question many policyholders have is whether their insurer can decline to renew their property coverage because of disaster risks or other reasons. Generally, with few exceptions, insurers can decline to renew policies for any reason as long as the insurer gives advance written notice stating their reason for declining to renew. While the insurer's renewal or nonrenewal of its policy is, like all insurer conduct, subject to the duty to act in good faith, insurers are generally under no obligation to renew policies. The insurer's reason for declining to renew need not be good, fair, or justifiable as long as it is disclosed.
Of course, insurers may not decline to renew a policy because of the insured's race, creed, color, national origin, language, gender, orientation, marital status or disability. Also, insurers generally cannot decline to renew automobile policies based on traffic violations or collisions occurring more than three years prior unless the prior events are significantly relevant. Another notable exception is insurers cannot decline to renew an automobile policy's comprehensive or collision coverage due to comprehensive, road service or towing claims submitted.
Does Renewing Change Your or the Company's Rights?Importantly, renewing a policy does not necessarily waive any grounds for cancellation that might have existed prior to renewal. So if grounds for cancellation existed prior to the renewal, the renewal does not necessarily frustrate the insurer's right to cancel. It is also relevant that failure to pay the renewal premium rescinds the renewal, operating as a lapse in coverage as of the prior policy term's expiration date. However, the insurer's acceptance of late renewal premiums may operate to bar the insurer from asserting the renewal policy lapsed.
Always Read the Fine PrintMany insurers purport to make renewal "automatic," but even purportedly automatic renewals need to be carefully scrutinized. Reviewing the fine print when insureds renew their policies is critical. Insurers are generally within their rights to add new restrictions, exclusions or conditions to policy contracts upon renewal, and under only minimal obligation to notify policyholders of such changes. Similarly, even when an insurer purports to "automatically" renew the policy, renewal is not effective until the insured pays the renewal premium.
And any new legislative or regulatory enactments not effective prior to renewal can become operative on the terms of the renewal policy, even if the new enactments are not retroactive.