If you no longer want or need coverage, you can cancel your life insurance policy. But here’s the bad news: You most likely won’t see any of the money you paid in premiums.
You can typically cancel your life insurance policy at any time — either by letting your insurer know or no longer paying premiums. Canceling a term life policy is pretty straightforward. But since permanent policies are life insurance and investment products rolled into one, the process can be complex and time-consuming.
If your term life policy has a conversion feature, you can convert to a permanent policy before the deadline. Depending on your insurer, this may be within the first five to ten years of taking out the policy, or before your 60th, 65th or 70th birthday.
If the deadline has passed, you won’t be able to convert your coverage.
In most cases, you won’t receive a refund on the premiums you paid. However, when you purchase a policy, insurers are legally required to give you a cooling-off period. This is known as the free look period, and it lasts 10 to 30 days depending on the state you live in. If you cancel your policy during this time, you’ll be reimbursed for any premiums you paid.
The process varies between policies, but these are the general guidelines.
To cancel your coverage, you can call your insurer, write a letter or fill out a cancellation form.
Since permanent policies have an investment component, canceling is a little more complicated. You’ll need to contact your insurer. Depending on your insurer’s guidelines and how long you’ve owned the policy, you’ll likely have a few options to cancel:
If you stop paying premiums by the end of the grace period — which is usually 30 days from your premium’s due date — your insurer will cancel your coverage. But if you have a permanent policy with accumulated cash value, you’ll lose it — so only go down this route if you’re comfortable with that. And it may affect your ability to get coverage later on, especially if you want to apply with the same insurer.
If you want to keep your coverage but can’t afford to pay your premiums, you might be able to:
Permanent policies contain a cash value component that grows over time. If you surrender your permanent policy, you might be able to collect some of the cash value — and this is known as the “cash surrender value.”
The dollar figure you’ll get depends on how long you owned the policy. For example, if you cancel during the first few years of taking out a policy, you may not have built up enough cash value to collect. And if you cancel at a later stage, you’ll receive the cash value minus any fees, charges and loans.
The catch? Your cash value surrender might be taxed if the amount is larger than the cost basis of the policy. The basis is the money you’ve contributed to the cash value via your premiums.
If your employer decides to stop offering life insurance as part of its employee benefits, it can cancel your policy. Otherwise, your coverage will automatically be canceled when you leave that job — unless there’s an option to convert to an individual policy.
If these situations apply to you, it might make sense to cancel your life insurance:
You’ll need to apply for a new policy, and potentially go through the underwriting process again. Your insurer will charge you a much higher rate, too. This is because life insurance premiums are based on factors like your age and health, so the longer you wait, the more you’ll pay for coverage.
If you let your policy lapse, most providers will reinstate your coverage within 30 days. You might not need to fill out any additional paperwork, but you will have to make up the premiums you missed.
Your insurer can cancel your policy in two circumstances:
Your insurance company can’t cancel your coverage if you start smoking, take up a dangerous job, gain weight, or are diagnosed with a health condition.
Canceling it is a fairly straightforward process, and can be as easy as you stopping payments. But unless you cancel during the free look period, you won’t get your money back.
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Hi, I need a form to cancel our son’s life insurance policy. We had this policy taken on him when he was young but now we like to cancel it. Our son never found out we had this policy.
Hi Arne,
Thank you for reaching out to Finder.
IF you know the name of the company as well as the policy number of the insurance you took out, you may contact the insurance company directly to request for a cancellation form to start the process. Hope this helps!
Cheers,
Reggie
I have been paying a life insurance policy for about 15 years. It is only for $10,000 & $5,000 accidental death cover. The premiums have just gone up from $78 to $100 per month and I can no longer afford it. I have just turned 70 and just wanted a little money to leave for my disabled child. I struggle as it is should I keep paying or cancel the policy?
Hi Judy,
I am sorry to hear about the recent premium increase on your life insurance policy, which has now made it unaffordable for you. To help you determine how you should move forward, here are some things for you to consider:
1. You can compare cheap life insurance from top companies to find a better price for the same coverage.
2. If you cancel and use that money to pay $75 a month into an interest-bearing savings account instead, within 5 years you would have $5,000.
3. Remember that certain policy rates increase with age, so you may face another increase in the future.
Ultimately, assessing your current financial situation will go a long way in helping you decide which course of action is right for you.
I hope this helped! Please feel free to reach out with any additional concerns.
Best,
Zak
yes
Hi Wei,
Thank you for reaching out to finder.
If you are pertaining to yes in canceling your life insurance policy, you may do this by contacting the company where you took the policy out to know about the procedure in having this process completed. Hope this helps!
Cheers,
Reggie
Can I cancel my life insurance if it’s linked to my bond
Hi Lizette,
Thanks for reaching out! Generally, there is a period option in a life insurance which you can cancel your policy within days of policy starts. It would be best to review your policy as well as the terms and conditions of the bond to check for any consequences when you do decide to cancel it.
Hope this was helpful. Don’t hesitate to message us back if you have more questions.
Best,
Nikki
Do I have money since my mom passed
Hi Heidi,
Thanks for leaving a question on finder and sorry to hear about your mother’s passing.
If your mother has life insurance, you can file a life insurance claim by following these steps:
1. Prepare to file. To file a claim, your insurer will typically require a copy of the death certificate, related medical reports and any original policy documents available.
2. Notify your insurer. Your beneficiary or rep contacts the insurance company by phone or online to start a claim. At this point, only policy information and the date and cause of death are required.
3. Follow your insurer’s procedure. From here, the process depends on your insurer. Generally, your beneficiaries will receive hard-copy forms to complete against specific instructions. Your insurer may also assign an officer to your claim.
4. Submit forms and supporting documentation. Your beneficiaries submit completed claims form, your death certificate and other documents as requested. 5. They’ll also indicate their payout preferences, either a lump sum or structured annuities.
Wait for assessment. Your insurer assesses your policy’s claim and supporting documentation. The process can take anywhere from a week to a month or more.
6. Learn claim decision. Your insurer announces whether your policy’s claim is accepted, declined or requires additional information.
-Payment of claim. Your insurer pays out the claim by check as requested by the beneficiaries. Ongoing payments can be sent by check or direct deposit to a bank account.
-Rejection of claim. If your insurer declines the claim, your beneficiaries have the option to file an immediate objection unless the rejection is due to fraudulent or falsified information in the policy or claim.
After your insurer pays out the benefit to your beneficiaries, your policy is considered closed. The payouts might be subject to taxes depending on your circumstances.
Cheers,
Joel