You have the option to cancel your life insurance policy if you no longer want or require coverage. However, there’s some bad news: you are unlikely to get back any of the money you paid in insurance premiums.
Terminating term life insurance can be as simple as contacting the insurance provider and stopping payments. It is necessary to have a conversation with your insurance company in order to cancel a whole life policy.
But, more specifically, what are good reasons to cancel a term life insurance policy? And if you are sure that you or your loved ones no longer need the life insurance policy, how do you do it?
Here in this article, we will tell you how to cancel your life insurance policy.
How To Cancel Life Insurance
Although the procedure varies from policy to policy, the following are the general guidelines. However, it is important to know that canceling a life insurance policy differs depending on whether it is a term life insurance or a whole life insurance.
You can cancel your term life insurance coverage by calling your insurer, writing a letter, or completing a cancellation form. Generally speaking, the following is a step-by-step procedure for canceling a term life insurance policy:
- Easily get in touch with your life insurance company and inquire about the cancellation process.
- Include your full name, contact information, policy number, and the date on which you wish to terminate your coverage when canceling.
- Cancel any automatic payments you may have set up with your bank or insurance company, which will take effect from the date of cancellation onward.
- You should follow up with your insurer to ensure that the policy has been canceled if you have not received confirmation within a few business days.
Other Ways To Cancel
If that does not work for you, here are other ways to cancel your term life insurance policy as per Policy Genius:
- Put an end to your premium payments. In the event that you miss a premium payment and do not make up for it within the grace period — the 30-to-31-day period following your due date during which you still have insurance coverage — your insurance is canceled.
- Write a letter. Provide written notice to your insurer stating that you wish to cancel your insurance coverage. Some insurance policies specify in their contracts that issuing a stop-payment order for your premiums qualifies as written notice, but you can also write a very simple letter to serve as written notice in many cases. The following is an example of a cancellation letter for a term life insurance policy:
Dear INSURER,
I’m writing to cancel my policy, effective DATE. My policy number is POLICY NUMBER. Please return any unused premiums to ADDRESS.
Sincerely, NAME
Check your provider’s website too — some may have a way to submit notice online.
Canceling Whole Life Insurance
The act of canceling a whole life insurance policy entails more than simply stopping your payments. Each policy has slightly different forfeiture rules, so call your insurer first to find out what they are.
Your options will be determined by the length of time you’ve had the policy and the rules of your insurance company. Here are some ways you can cancel your whole life insurance policy:
- Cash-out or surrender your whole life insurance policy. Whole life insurance policies include a cash value account that grows in value over time. Each policy has a cash surrender value, which is equal to the cash value minus any applicable fees or penalties. You may be able to surrender your insurance and collect any accumulated cash value. However, you will almost certainly be charged cancellation fees, particularly if you cancel the insurance within the first 10 to 20 years of purchasing it. Typically, the first two to three years’ fees are high to cover the insurer’s costs of marketing and setting up the policy. Following that, surrender fees are typically decreased by a percentage per year for the first decade.
- Choose a reduced paid-up option. Your insurer may offer this alternative, which entitles you to cancel your insurance but preserve a lesser death benefit. Your beneficiaries will receive a lump payment if you die.
- Sell your insurance policy. You may be able to sell your insurance to a third party in exchange for a one-time payment. This is referred to as a life settlement, and the purchaser becomes the beneficiary and owner of the policy, as well as the payer of the premiums. Bear in mind, however, that the amount to you will typically be less than the death benefit.
