Discontinuance

What Does Discontinuance Mean?

Discontinuance refers to the termination of an insurance contract, often due to the policyholder’s failure to pay the premium. This termination becomes official when the insurer issues a notification to the insured.

Insuranceopedia Explains Discontinuance

Discontinuance, particularly in health group coverage, is not a sudden process that begins with the non-payment of premiums. In group health plans, the sponsor typically handles premium payments on behalf of covered members, so discontinuance usually results from the sponsor’s failure to pay rather than from individual non-payment. If the sponsor chooses to terminate insurance due to non-payment, the insurance company remains liable for claims during the grace period. Additionally, there is an extension period for coverage, even if the sponsor has obtained another insurer. When a group plan is discontinued, covered employees and dependents may be able to keep their coverage temporarily through COBRA insurance, which requires them to pay the full premium cost themselves. To ensure the discontinuance is valid, the insurer must also notify all individuals who will be affected by the termination.