What does cancellation mean in insurance terms?

In insurance terms, cancellation refers to the termination of an insurance policy before its expiration date. This can happen for various reasons, such as non-payment of premiums, the policyholder requesting to end the policy, or actions deemed risky by the insurer. When a policy is canceled, it is important to understand that coverage is no longer effective, and the insured may need to seek new coverage if they still require insurance.

The other choices do not accurately describe cancellation. Renewing a policy involves extending its duration, which is the opposite of cancellation. Reducing coverage pertains to altering the terms of the policy to provide less protection but does not terminate it. Lastly, negotiating lower premiums is related to the cost of the insurance rather than the status of the policy itself. Therefore, understanding that cancellation specifically refers to the ending of a policy situates it clearly within the framework of insurance terminology.