ACORD 35 – Cancellation Request / Policy Release
When I was first getting into the insurance business this form was also often referred to as a Lost Policy Release. Man, were those wild and crazy days or what?
Purpose of the Cancellation Request Form
The ACORD 35 is proof of the insured’s intentional request to have a specific policy cancelled. You need to be absolutely certain to get a legal signature from the insured on this form. The signature can be either by hand or an electronic signature as used on our Fill In and Print forms if you have Acrobat Approval or the full version of Acrobat.
Types of cancellations
There are three types of cancellations available on the cancellation request and for any policy in general. They are flat cancellation, pro rata cancellation and short rate cancellations.
A flat cancellation is checked on the cancellation request when the policy is basically just called null and void. The most important parts of a flat cancellation are that…
1 – The coverage never went into effect so the insurance company never had any exposure to a claim.
2 – Any premium payment is refunded in full.
The two ways that I am aware a policy can be cancelled flat are..
1 – The potential insured’s payment was not honored. For instance the check to the insurance company did not clear.
2 – The insured returns the policy or signs the cancellation release. Sometimes proof of other coverage in force may be requested to go along with this. Especially when the initial issuance of the policy included some sort of proof of insurance for getting a car license tag or a drivers license, you and the insurance company need to very cautious with flat cancellations.
Pro Rata Cancellations
A pro rata cancellation is checked on the cacncellation request when the insurance company requests cancellation for reasons other than non payment of premiums. The premium refunded to the insured is the pro rated amount of the actual term premium without penalty. (Pro Rata is used instead of Pro Rated I guess because it sounds more grown up.)
Determining the pro rated refund can get very complicated if there have been mid term endorsements with premium changes. You should be very economical with any statements you make to your customer about the exact amount because it is easy to be wrong.
Short Rate Cancellations
A short rate cancellation is checked on the cancellation request when the insurance company requests cancellation due to non payment of premiums due. Premium finance companies can also cause a policy to be cancelled for non payment of premiums due the finance company. ( I think they should stick with the pro rata format and call this a short rata cancellation.)
A short rate cancellation is supposedly a pro rata calculation with a 10% penalty, but the actual formula never works out this way. If you use a pro rata wheel, you will see how this is true.