What does Cancellation mean? Read on to discover the definition & meaning of the term Cancellation - to help you better understand the language used in insurance policies.
The termination of an insurance policy or bond, before its expiration, by either the insured or the insurer. Insurance policy cancellation provisions require insurers to notify insureds in advance (usually 30 days) of canceling a policy and stipulate the manner in which any unearned premium will be returned. As respects reinsurance, cancellation is used in the following contexts: (1) Runoff basis means that the liability of the reinsurer under policies that became effective under the treaty prior to the cancellation date of such treaty shall continue until the expiration date of each policy. (2) Cutoff basis means that the liability of the reinsurer under policies that became effective under the treaty prior to the cancellation date of such treaty shall cease with respect to losses resulting from accidents taking place on and after said cancellation date. Usually the reinsurer will return to the company the unearned premium portfolio, unless the treaty is written on an earned premium basis.
We hope the you have a better understanding of the meaning of Cancellation.