All You Need to Know About Cancelling Your Life Insurance Plan
Canceling your long-standing life insurance policy may seem like the right and obvious thing to do when you don’t need or want coverage. But while it’s possible, remember that life insurance is not like other types of insurance policies that you may just stop needing. Since life insurance provides a financial safety net for your dependents, it’s a good idea to have an active policy at all times, should something unfortunate happen. That said, it is possible to cancel your life insurance policy if you really want to. Read on to know more.
Can Policy Buyers Cancel Their Life Insurance Plans?
You can normally cancel your life insurance policy at any time. For term life policies, you can let your insurer know that you wish to no longer continue with the plan (typically by sending a letter) and stop paying premiums — as long as no claims are filed in the meantime, your plan can be considered canceled. Simply letting the policy lapse is sufficient to cancel it, and usually, no paperwork is required. Permanent policies are more complicated since they combine life insurance with investment — to cancel such a plan, the financial professional who sold you the policy will have to determine how much of your premium went into investments and refund that amount to you.
Do Life Insurance Companies Refund Your Premium?
If you happen to cancel your life insurance policy during the free look period, you’ll get your money back. The length of the free-look period usually depends on the state, but it typically ranges between 10 and 30 days. If, however, you decide to cancel your policy after this period (say, a year into the coverage), don’t expect to get anything back. You may be allowed to tap into your cash value, though, if you purchased a permanent life insurance plan.
What to Do if You Can’t Afford the Premium
If you’re thinking of canceling your policy because you can’t afford the premium, there are alternatives you need to consider. For instance, you can reach out to the insurance company and ask them if they would be willing to reduce the coverage and the premium. Or, if your health has improved since you purchased the plan, take another medical exam to prove to the company you’re in better health and, thus, don’t pose as much risk.
