Canceling Your Aviation Insurance Policy Midterm
Are you thinking about canceling your aviation insurance? Maybe you are no longer able to fly your aircraft. Perhaps you have sold your plane, and insurance is no longer needed. Maybe you have acquired insurance from another provider. Without getting into a discussion if cancellation is the right step to take or not, it is important to understand what you can expect when you do decide to cancel your aircraft insurance policy.
In many cases, people think I have, and now I am due at least a pro-rated refund. Depending on the carrier and where you are at in your policy term, this may or may not be true.
Often times, when someone cancels their insurance on their aircraft mid-term, can result in a return premium penalty known as a “short rate cancellation”. So what is a short rate cancellation? This is where someone personally cancels their own insurance policy, and a surcharge is placed to help compensate for the time and effort initially set to cover the cost of underwriting. While the administrative cost is upfront in most cases, it is earned back on an equal basis through the policy’s term period.
When a consumer is disconnected from the underwriting process, it is easy to understand why they may be concerned with this fee. Once they are informed that the fee helps cover the administrative cost in writing the policy because the cost was not realized due to a shortened term, most people understand this is not an unreasonable cost or expectation.
In most cases where a short rate cancellation is used the amount of the fee will be based on how far along in the insurance policy one is. If the cancellation is early on in the insurance policy, this fee can be as much as 10 percent of the unearned premium. Over time the administrative costs are absorbed, and thus the fee is reduced as the policy ages.
Do you have any questions about your aviation insurance? Whether looking to acquire insurance, check on rates, or simply looking for a new agent, we can help.
Contact us today, and one of our highly experienced agents will be happy to listen to your needs and act on your behalf to help you get the right coverage at the right price.
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