Insurance Coverage Q&A: Insured's Mid-Term Cancellation Is Short-Rated
This question deals with the reasoning behind why an insured's mid-term cancellation is short-rated rather than pro-rated.
October 04, 2021 at 04:22 AM
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If an insured cancels their Business Owners policy mid-term due to replacing with another company, we have an insurance company that cancels short-rate. However if the insured cancels due to sold, closed or ceased operations, then they do a pro-rata. They utilize the ISO BOP forms. Wouldn’t this be considered discrimination? The insured was with this company for over 40 years. The ISO cancellation states: if we cancel, the refund will be pro rata. If the first Named Insured cancels, the refund may be less than pro rata. We feel this is discrimination as the insured was replacing with another company. Please advise.
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