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The decision of when to cancel an insurance policy, not being replaced with another policy, depends on the type of policy:
Auto – In Massachusetts the vehicle may be deleted, or if there is only one vehicle on the policy the policy may be canceled when the vehicle is sold or the lease terminated, the registration canceled, and the Plate Return Receipt submitted to your agent or insurance company.
Property – When the property has been sold and you no longer have an ownership or other interest in the property you should cancel the policy.
General Liability – This depends on the coverage provided by the policy and the type of operation, service or product you sell. Standard General Liability policies provide coverage for three types of situations: ongoing operations, completed operations and product liability.
For example, an electrician installs wires in a house. The ongoing operations covers him while he’s on the job site; completed operations covers him after he completes the work; and products liability covers the wiring, sockets and light fixtures he installed in the house. If the electrician closes his business and cancels his coverage he has no coverage for claims that occur after the cancellation date even though the work was done during the policy term because the coverage reads “the bodily injury or property damage must occur during the policy period.” To clarify: an electrician installs wiring in August,. He cancels his coverage in October. In December the wiring starts a fire. Since he canceled his converge in October he has no coverage for the fire in December even though he installed the wiring in August when he had coverage.
Professional Liability - When all operations have ceased, instead of canceling the policy purchase the extended reporting period or other coverage available to cover any claims reported in the future for services provided in the past.
Workers Compensation – When there is no employee, subcontract, contract or 1099 labor being used or paid, and the Principals aren’t required to be covered, the policy may be canceled. In Massachusetts, if a corporation isn’t dissolved and the officers don’t want to carry Workers Compensation they may apply to be exempt from the law requiring the coverage. In order to be exempt corporate officers must own at least 25% of stock in the corporation. This is the link to the MA Division of Industrial Accidents corporate officer exemption website: http://www.mass.gov/lwd/workers-compensation/investigations/form-153.html
With respect to all of the insurance lines referenced above, another issue to consider is have you signed any contracts requiring you to maintain coverage?
The decision to cancel a policy can be complicated. Call the insurance professionals at Gordon Atlantic toll free at (800) 649-3252 to discuss your personal situation. Prefer to type instead of talk? Click below for a prompt answer to your question!
