Glossary
Cancellation
The termination of a policy before its expiration date, initiated by the insured or by the carrier for reasons such as non-payment.
A cancellation ends coverage early and triggers a return of unearned premium, calculated either pro rata or on a short-rate basis that penalises the insured for cancelling voluntarily.
Every cancellation produces a commission chargeback. The carrier reverses the commission attributable to the unearned portion, and it appears on a later statement as a negative line. Agencies that do not reconcile these carefully end up with commission income overstated in the month of sale and understated later.
See also
- Reinstatement — Restoring a cancelled policy to active status, typically after the insured pays overdue premium within an allowed window…
- Chargeback — A reversal of a previously paid commission, typically because a policy was canceled, downgraded, or the premium was retu…
- Return Premium — Premium refunded to an insured when a policy is cancelled mid-term or an endorsement reduces the exposure.