What characterizes a cancellable insurance policy?

A cancellable insurance policy is characterized by the insurer's ability to cancel the policy at any time, provided they give notice to the policyholder, and they return any unearned premiums. This means that if a policyholder cancels their cancellable policy or if the insurer decides to cancel it, any portion of the premium that has not been earned for the coverage period will be refunded to the policyholder.

This type of policy offers flexibility for both the insurer and the insured, as the insurer maintains the right to terminate the contract while ensuring that the insured does not lose out on the money they paid for the coverage that was not used. Other options describe different types of policies or provisions. For example, a non-cancellable policy would prevent cancellation once issued, which does not apply here.