Before the question of how to cancel life insurance comes up, it holds that a running policy has been in existence.
You’re probably asking: “Why is it called a Life Insurance Policy if it is subject to cancellation? Shouldn’t it span one’s entire life?”
Reasons to cancel a life insurance policy
There are several reasons you may want to cancel your life insurance policy. A significant change in income (or a loss of one’s job), for instance, may culminate in the cancellation.
Additionally, you may decide to cancel if you’ve hit the bull’s eye on your savings. If you have accomplished a savings milestone, you may choose to part ways with your current insurance policy.
When you cancel your life insurance policy; ideally, you stop making payments. It also plays out that your beneficiaries do not receive benefits.
How do I cancel my life insurance policy?
The steps on how to cancel life insurance are different depending on the kind of policy you have – whole life insurance policy or term life insurance policy.
Cancelling term life insurance policy
- Sell your life insurance policy: Compared to its Whole Life variant, the Term Life Insurance Policy is relatively easy to cancel. This is because it requires less commitment. In most insurance policies as this, you leave without nothing. Rather than outrightly cancelling your policy, some insurance experts advise that you sell your life insurance policy. This is referred to as ‘Life Settlement’. Here, you could sell off a portion of your policy. In that case, the buyer would take a part of monthly payments in exchange for a fraction of the death benefit.
- Stop paying the premiums: If you have, however, made resolutions to cancel your term life insurance policy, all you need to do is stop paying the premiums, and the insurer (insurance company) will cancel.
Cancelling whole life insurance policy
- Contact your insurer: As opposed to the former, this kind of life insurance policy does include some benefits when you walk away. However, it attracts a couple of complications when you resolve to cancel. To do this, for instance, you have to discuss the options with your insurer. Some of these complications may stem from your insurer trying to talk you out of your decision. By and large, they may not want you to cancel. The onus is left to you to stand your ground – if you have genuinely resolved to cancel your whole life insurance.
- Cash-out your policy: However, it attracts a couple of complications when you resolve to cancel. To do this, for instance, you have to discuss the options with your insurer. Some of these complications may stem from your insurer trying to talk you out of your decision. By and large, they may not want you to cancel. The onus is left to you to stand your ground – if you have genuinely resolved to cancel your whole life insurance.
- Nonforfeiture: This is an option that opens up when you eventually stop making payments. Essentially, you could either decide to take the cash and close the policy or keep a portion of your benefit. Nonforfeiture allows you to stop making payments while maintaining life insurance coverage.
Will I get my money back?
You may be wondering if you would get your money back after cancelling your life insurance policy. The answer to this is – If your policy has a cash value, you will receive the amount when you walk away.
Cancelling your policy is a serious decision, and you have to weigh the pros and cons before diving. Before you cancel your life insurance, we recommend that you consider discussing it with your loved ones.
Moreover, if the cancellation is due to financial constraints, you may want to weigh your options carefully before making a move. Signing back up for a new policy may cost more than your old one due to age.