Can a life insurance company cash your check for the payment and then decide to terminate your policy?

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Can a life insurance company cash your check for the payment and then decide to terminate your policy?

I had until a certain date to make my payment and my local insurance rep said as long as the envelope was stamped with that date there would be no problem. The company cashed my check and then I received a notice saying they were canceling my policy and it was not reinstateable. I have had this policy for 15 years. They said they would be cutting me a check for the reimbursement. I feel that cashing the check states that they were accepting it as payment.

Asked on September 26, 2011 under Insurance Law, Colorado

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

WHY is the insurer cancelling your policy? That is the critical issue. Insurance policies are contracts; they are enforceable as per their terms. A policy may not be cancelled for no reason, or indeed for any reason except those in the policy itself. So you need to 1) find out from the insurer *why* they cancelled and 2) carefully read your policy, to see what grounds there are for cancellation; then you can evaluate whether they cancelled your policy improperly. If they did cancel it improperly, you can bring a breach of contract action against the insurer seeking reinstatement and/or monetary damages. Note that many policies, however, contain multiple grounds for cancellation, so it may well be the case that what the insurer did, while unfair, is legal.


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