If an insurance company sends you a letter cancelling your disability or life insurance policy, along with a check for all the premiums you paid, don’t cash that check! In fact, if you feel your policy should not have been cancelled, you should seriously consider continuing to pay your premiums.
When a disability or life insurance company decides that you made a misrepresentation in the application for the policy that materially affected their ability to determine whether they should contract with you, within certain time limitations, they can attempt to rescind your policy. Rescission is a fancy word for a cancellation of a policy where the insurance company places you back in the position you were in one moment before your contract was issued.
If you cash the check, it can be construed as your acceptance of the insurance company’s cancellation of the policy. But if the insurance company continues to collect premiums from you when they believe they have a reason to rescind your policy, it could mean that you get to keep the policy.
When in doubt, wait to cash the check, and seek the advice of an experienced insurance attorney.