Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: May 2, 2012

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As a general rule, a policyholder may elect to cancel an insurance policy at any time by giving notice to the insurance company. In some cases you may be required to return the original policy or sign a “policy release”, and of course you will be responsible for any premium earned through the date of cancellation.

Sometimes there are financial penalties for early cancellation by the policyholder. Most property and liability policies require what is called a “short rate” penalty when a policyholder requests cancellation, which means that the company retains a disproportionate amount of the premium. For example, if you have a one year policy and you request cancellation after six months, the “short rate” penalty would allow the company to retain more than one-half of the annual premium. Also, many types of life insurance policies and annuities impose “surrender charges” if they are canceled before they have been in effect a certain number of years. A policy must clearly describe any applicable cancellation penalties or surrender charges.

Generally, there is no financial penalty per se to canceling disability insurance coverage.