Cancelling a life insurance policy
Check three things first. One of them is irreversible.
Cancelling a life policy is straightforward to do and frequently regretted, because the thing you're giving up is priced on the age and health you had when you bought it.
There are three checks worth making before you do.
One: are you replacing it?
If you're switching to another policy, do not cancel until the new one is issued and in force. Not when you apply, not when it looks likely.
If the new application is declined or postponed and you've already cancelled, you may not get the old coverage back — particularly if your health has changed since.
Two: does it have value?
A permanent policy may have cash value. Surrendering it means taking that value and ending the coverage, and surrender charges may apply depending on how long you've held it.
There may also be a taxable event on the gain. Check both before assuming cancelling simply stops a bill.
Three: is there an alternative to losing it entirely?
If the issue is affordability rather than need, other options frequently exist.
- Reducing the death benefit to lower the premium
- Changing payment frequency
- Using cash value to cover premiums temporarily
- Non-forfeiture options such as reduced paid-up coverage
- Converting part of a term policy rather than all of it
How to cancel properly
Do it in writing through the insurer and get confirmation. Simply stopping payments causes a lapse instead, which is a different event and may leave a permanent policy in an unintended state under its non-forfeiture provisions.
Common questions
That causes a lapse rather than a cancellation, and on a permanent policy it may trigger non-forfeiture provisions leaving it in an unintended state. Cancel in writing and get confirmation.
Term policies generally have no cash value. Permanent policies may, less any surrender charges — and there can be a taxable event on the gain.
Ask about reducing the benefit, changing payment frequency, using cash value, or non-forfeiture options. Losing the coverage entirely is rarely the only choice.
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This page is general information, not advice about your specific circumstances. A licensed insurance professional can tell you what’s actually available to you.
General information only, not insurance advice. Coverage, availability, and terms vary by insurer and by state, and are subject to underwriting. Quote My Policy LLC is a licensed insurance producer. Nothing here binds coverage.