Sometimes it pays to read the Terms and Conditions (note that it's important to read the Terms and Conditions that apply where you live, since they can vary from country to country).
Interesting note regarding renewals (quoting the US Terms and Conditions, emphasis added): That emphasized part is new. Previously there was no mention of renewal at all. That suggests that Apple is allowing for the possibility of extending the coverage past 2/3 years.
Until now, AppleCare has not been renewable under any circumstances. It appears they've reconsidered. On the monthly payment plans that makes AppleCare+ consistent with most of the monthly plans offered by the phone companies, which typically bill monthly on an indefinite basis. And if they do offer extensions on the pay-in-one-lump-sum plans... also a big change for Apple.
Apple's Terms and Conditions do cover these questions. For the month-to-month plans (again, the US terms): In other words, the monthly plan is no longer a 2-year plan, but an indefinitely renewing plan. As far as cancellations go, the Terms do describe the circumstances under which Apple is able to cancel. The reasons for cancellation by Apple would be non-payment of monthly plans, fraud, or repair parts becoming unavailable.
I've never heard of someone's coverage being canceled after a single incident.