While it is always preferable to pay your premiums to prevent an insurance policy from lapsing, there may be unforeseen circumstances that prevent you from paying the amount owed. If you have let an insurance policy lapse, submitting a no loss letter, or a statement of no loss, to your insurer is one of the steps you must take to have the plan reinstated. It guarantees that neither you nor a third party will make any claims against the policy for losses that occurred during the period you were uninsured. Typically, this document can take the form of a letter drafted by you or a form provided by your insurer.
What Are the Benefits of Using a No Loss Letter?
If you do not use a statement of no loss but still require coverage, an underwriter from the insurance company will need to rewrite the policy. This will require you to apply for a new plan and complete the necessary paperwork again. You may also need to submit a down payment for the new policy. This process will likely be more expensive and time-consuming than submitting a no loss letter.
Finally, it is important to know that, in addition to requiring a no loss letter, your insurer will ask you to pay the overdue premiums before they reinstate the plan. They may also charge you a penalty for allowing the policy to lapse. Moreover, it is possible that your premiums will be raised when your policy is next renewed.