California Life and Health Insurance Practice Exam 2025 – Your All-in-One Guide to Exam Success!

Cancellation of a policy refers to the ending of an insurance policy before its expiration date. This occurs when either the insurer or the policyholder takes action to terminate the coverage, resulting in the policy ceasing to provide benefits or coverage for future occurrences. Typically, the insurer will notify the policyholder of the cancellation, which can happen for various reasons, such as non-payment of premiums, fraud, or changes in risk.

In contrast, when a policy is renewed under different terms, it does not refer to cancellation but rather to the continuation of coverage beyond the original terms and conditions. Similarly, termination of coverage after the expiration date indicates that the existing policy is allowed to expire, but this is not a cancellation since no premature termination is involved. Lastly, suspending payments for a specific period is related to the payment terms rather than the status of the policy itself, and it does not imply that the policy is being canceled. Therefore, the correct understanding of cancellation aligns accurately with the concept of ending a policy prior to its intended expiration.