Time On Risk

Time on risk (TOR) is a term used by the insurance industry to define the starting point and ending point of a period of coverage. This is when your policy starts and when your policy finishes. These dates are shown on the declaration page of the policy.

If you chose to cancel your policy midterm then there would be a revision done to the policy documents and the declaration would now show the new ending date. The insurance company will bill you for the actual time you had insurance - the time on risk.

Beware the term which could be shown on your policy document, "minimum retained premium". The insurance company can set up anything from $25 to the full premium amount as the minimum. The result of such is if you cancel your policy one week after it starts you could end up paying this amount. The time on risk is not relevant, you will be charged at least the minimum amount.

When an automatic withdrawal payment plan is set up the usual requirement is two month's down payment. This is to allow for a mid-term cancellation due to a rejected withdrawal for such as a closed bank account or non-sufficient funds (NSF). The insurance company has to send a registered letter to give the required 15 days notice to the insured. If the insurance company has collected payment in advance then it is likely to have adequate money to cover the time on risk.

If the payment plan is 40-30-30 then the payment is usually completed within 180 days to ensure adequate time on risk. These plans are set up to protect the insurance company, not you, the insured.

Some insurance policies will require a large minimum retained premium for a new commercial account. This can be required if the business operation is seasonal - such as snow removal. So the time on risk would not be relevant, that minimum would be charged and collected.