A lost policy release (LPR) is a statement that releases an insurance company from its liabilities. An LPR is signed by the insured party and signifies that the relevant insurance policy has been either lost, destroyed, or is otherwise accounted for.
Historically, whenever an insured party sought to cancel an insurance policy, they were required to produce the original insurance documents issued when the policy was underwritten.
Key Takeaways
- A lost policy release (LPR) is a document that releases an insurance company from its liabilities.
- In today’s digital age, canceling an insurance policy usually doesn’t require the return of original documents, making LPRs often unnecessary in most cases.
- For instance, auto insurers might ask policyholders to sign an LPR when switching providers, a process typically completed online.
If an insurance policy was lost or misplaced, the insured party had to confirm its cancellation with an LPR. Essentially, this document confirms the policyholder’s intent to cancel the policy.
Understanding Lost Policy Releases (LPR)
Historically, lost policy releases included standard clauses. These generally allow either releasing or canceling a policy, which essentially serve the same purpose.
Nowadays, lost policy releases are unnecessary for most types of insurance transactions, eliminating the need to mail back original policy documents.
One exception is auto insurance. An auto insurer may ask for a signed LPR when a policyholder switches insurance providers. Once this form is signed, the insurer is no longer liable for reimbursing the policyholder’s losses. Modern conveniences mean this process often occurs online.
Different Types of Cancellations/Lost Policy Releases
There are three typical types of cancellations when filling out an LPR, commonly referred to as “cancellation/lost policy releases”: flat, pro-rata, and short rate.
1. Flat Cancellations: These are enacted when the insurer never faced any financial risk because coverage never commenced. Typically, premiums are refunded in full.
2. Pro-Rata Cancellations: If a policy is canceled before its expiration date, the insured party may be entitled to a portion or all of the remaining unearned premium, which is the money set aside by the insurer to cover potential liabilities.
3. Short Rate Cancellations: These occur when the insured fails to pay premiums, resulting in the insurer canceling the policy. LPRs may also apply if an insurer issues a replacement policy. Once the LPR is signed for a replacement, the insurer is no longer accountable for any claims made post-cancellation. However, retaining old policy documents is advisable to resolve any arising issues with the new policy.
By understanding the scenarios and options available under a lost policy release, both policyholders and insurers can better navigate the often complex processes of insurance policy management and cancellation.
Related Terms: policy cancellation, insurance premium, unearned premium, cancellation date, liabilities in insurance.
