How to cancel life insurance
If you're thinking of cancelling your life insurance policy, rest assured that it can be done. Find out how to cancel, how much it costs and what the consequences might be.
Life insurance is an important type of cover to have, especially if you have dependants or a mortgage. However, circumstances change and you might find yourself having to cancel your cover.
If you need to cancel your life insurance policy and you’re not sure how to go about it or what it would mean for your cover later in life, we’ve put together all the information you need to know.
Can you cancel life insurance?
Yes, you can cancel any insurance policy, even during the cover term. However, the catch is that doing this might cost you money, as cancellation fees may apply. There’s also no guarantee you will get a refund for the unused premiums, even if you haven’t made a claim.
Why might you cancel your life insurance policy?
There could be a variety of reasons why you need to cancel your life insurance policy – your circumstances may have changed, you might need to save some money or you may have moved to a different country where your policy doesn’t cover you.
How to cancel life insurance
If you want to cancel your insurance policy, you should contact your insurer directly and let them know. The preferred method of communication might vary by provider but usually includes phone and email.
Some companies will have an app or online portal you can manage your policy through.
Can you cancel a life insurance policy at any time?
If you’re able to wait, the best time to cancel your policy is at renewal. That way, rather than cancelling, you will simply be advising your insurer you don’t want the policy to renew.
You can cancel your policy before it’s due for renewal as well, but this might incur a cancellation fee. The exact amount will vary by insurance company.
What happens if I cancel my life insurance policy?
Not much really. Mostly, you’ll just need to pay any cancellation fees due and then you’ll no longer be covered.
Note that you’re unlikely to receive any refund outside of the 14-day cooling-off period.
The most notable consequence of cancelling your life insurance policy (other than the fact your dependants won’t receive a payout if you die) is that, if you take out a new policy in the future, it’s likely to be more expensive since life insurance premiums get higher the older you get.
That said, you should still be able to take out a policy if you wish.
What is a lapsed life insurance policy?
A lapsed policy is one where the benefits have been ceased by the insurance company due to unpaid premiums. This usually happens after just one missed payment, and a policy can remain in a lapsed state for up to six months, depending on the insurer.
You can reinstate a lapsed policy by paying all the premiums owed on it. You will need to contact your insurer for this and reactivate your direct debit if it’s been cancelled.
That said, reinstating a lapsed policy can be pricey, especially if it has lapsed for several months. It might be worth checking how much a new policy will cost you, but make sure you are honest if asked whether you’ve ever had any lapsed insurance policies.
What’s the difference between a lapsed life insurance policy and a cancelled life insurance policy?
A lapsed policy means that the insurance company stopped the cover due to unpaid premiums, whereas a cancelled policy is usually stopped by the person insured.
There are different consequences to each type – a cancelled policy will usually incur a cancellation fee, and a lapsed policy might make future cover more expensive.
How to find the cheapest life insurance policy if yours has been cancelled
The definition of best is likely to change from person to person, especially when it comes to something as personal as life insurance. It will depend on your requirements and personal circumstances.
Whenever you are looking for insurance cover, the recommendation is to shop around and compare policies. One thing to remember is that cheapest doesn’t mean best, so make sure the policy you take out has sufficient cover for you and your family and not just a small price tag.
If you have a mortgage life insurance, this should only be cancelled as a last resort, or if you’ve managed to pay off your entire mortgage. Cancelling this type of policy can leave your loved ones in financial difficulty should something happen to you.
With other life insurance policies, if you’re in a difficult situation and really need to make the savings, then you’ll have to make some tough decisions.
However, don’t make the decision to cancel your life insurance policy based on the old “it will never happen to me” line of thinking. No one knows what the future may bring, so make sure you consider how your dependants will cope should the worst happen.
Frequently asked questions
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