Cancelling a life insurance policy
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Last updated: 17/01/2022 | Estimated Reading Time: 4 minutes
There are a variety of reasons for which you might want to cancel your life insurance policy, but it is not a decision you should take lightly. Not only will cancelling your policy obviously mean that you lose the protection it gave you and your family, but also you might find that if you choose to take out another policy in the future, it could end up costing more than your initial one did.
We’ll go through some of the main reasons why people tend to cancel policies and how to do so if you choose to.
One of the main reasons why people decide to cancel their life insurance policies is simply that they cannot afford to pay their premiums.
If you want to cancel for this reason though, you should be sure to work out a balance between the affordability of your premiums right now and the importance to your family of the pay out they would receive in the event of your death.
Many people take out life insurance policies so that they can continue mortgage or other loan repayments should they die before they are fully paid off.
If, say, you inherit or otherwise come into a large amount of money that allows you to pay off your debts early, then the reason why you took out the life insurance policy in the first place is no longer valid and cancelling could be a viable option.
You may also have simply found another, better policy, and want to cancel your current one on these grounds.
Cancelling a life insurance policy because of the financial difficulty of keeping up with the payments is a sort of catch-22.
That is to say, being in a position whereby regular payments are unaffordable because of economic difficulties may simply demonstrate the importance of the policy in the first place, particularly if the insured party is the primary earner in the household.
So when times are tough financially, and cuts need to be made to the household budget, life insurance shouldn’t be at the top of the list of things to sacrifice in order to save money in the short term.
Life insurance tends to be cheaper the younger you are when you take out the policy. So if you are planning to cancel your policy temporarily, only to reinstate it later on, you might want to reconsider, as this option often proves to be a false economy.
Add to this any health problems you may develop during the period when you aren’t covered, and you could find yourself paying significantly more to reinstate a policy than you did to open the initial one, only exacerbating any financial issues that you faced in the first place.
Some insurers will allow you to temporarily reduce the amount you pay per month in return for slightly reduced cover over that period, so if you really are struggling financially, talk this option over with your provider before you consider cancelling your policy.
Cancelling a life insurance policy is fairly straightforward and while you won’t be reimbursed for any premiums you have paid, you shouldn’t be charged any extra for ending the policy early.
All you need to do is send a letter to your provider informing them of your intentions, and they’ll take care of the rest as soon as possible.
If you’ve only recently taken out a policy and are now having second thoughts, you’ll generally have a 30 day grace period during which you can cancel your policy without paying anything at all towards it.
As usual, you should read up on the terms and conditions of your policy to make sure this option is available.
If you feel like your current life insurance policy is unaffordable, then before you cancel it outright you should compare life insurance quotes online to see if you could save money by simply opening up a different policy instead.
Our life insurance comparison tool is easy to use and totally free. We’ll help you get the best deals possible so that you can make sure that you and your family are rid of one financial worry both now and in the future.