There is a multitude of different reasons why people would want to cancel their life insurance policy. From wanting to pay off your loans early and not wanting an insurance policy to cover you for it, or just not wanting to pay premiums every month, there are a lot of valid reasons to want to cancel your life insurance.
While the reasons for not wanting to pay for your life insurance are deserving of a list of their own, this is a small guide on how you can cancel it. But before we can dive into that, here is what happens when you cancel your life insurance policy.
The Aftermath of Cancelation
There are three things that can happen if you cancel your life insurance policy.
- You will Forfeit Your Premium Payments
The first thing that you have to consider is that once you cancel your life insurance policy, you will no longer benefit from paid premiums that you would otherwise get back. This is especially the case when it comes to life policies that do not provide any refunds or do not offer any money back to you on cancellation.
- No More Life Insurance
This is the most obvious result of canceling your life insurance and you no longer have life insurance. This means that in the event of your death your family will not receive any monetary benefits. So, when you cancel your life insurance policy, you will also cancel your coverage.
- Re-applying For Coverage
Another very obvious result of forfeiting your life insurance policy is that you will have to reapply for coverage. Once you cancel your life insurance, you will also leave behind the current rate that you are paying and are at risk of paying more for the same rates later on.
So, if you reapply for life insurance, you might have to pay more for the same coverage.
Canceling Your Life Insurance
Even after reading all of the above-mentioned results, here is how you can cancel your insurance policy indefinitely. Depending on how long you have been covered by an insurance policy, canceling your insurance can be as simple as making a phone call or as complicated as a week-long process.
Free Look Period
If you happen to regret your choice of taking out an insurance policy almost immediately or sometime during the “free look” period, you can easily cancel your life insurance policy.
The “Free Look” period is a specific time frame of 10 to 30 days that every insurance company has, as it is compulsory in every state.
During the “Free Look” period you can cancel at any time, and you will instantly receive any premiums that you have paid.
For this, it is important that you check with your insurance provider on what their free look period is, how long it is, and other terms and conditions. This will save you from the hassle of having to go through the cancellation process.
After the Free Look Period
However, if you are past your free look period (which is most likely the case), there are two ways to go about your cancellation.
The first thing that you can do is to stop paying your premiums altogether. And yes it is that simple, but it can leave you and your insurance provider at bad terms; which is something that you should avoid. If you do not pay your premiums in the given grace period, the mandatory period before your policy is automatically canceled, then your policy will cease to exist.
Other than that you can also write a formal letter to cancel your insurance. Some insurance providers require a formal complaint in written form to effectively terminate your insurance. This is, of course, subjective to each company and is not necessarily the case with every insurance provider.
If your insurance provider does require a written complaint, a simple letter stating your reason should suffice.
Canceling a Whole Life Policy
Different insurance policies have different ways of cancellation, and the whole life policy does not have the same terms of cancellation as that applicable to standard insurance. According to the terms and conditions of your provider, there is a surrender period which is not the best time for you to cancel your policy.
Whole life policies come with monetary gains that allow you to cash in your policy for a certain amount. However, there is a certain period when you cannot cancel; this is called the surrender period. While a little on the nose, the surrender period differs from one provider to another and during the period you cannot cash in your policy. Once it is over, you can cash in and cancel your life policy.
The other option that you have in the case of cancelation is to let your policy lapse simply. Think of lapse as a pause feature on your insurance policy. If you do not come through on your payments in an orderly fashion, your provider may lapse your current policy with your permission.
This will allow you to continue your policy after a while, without having to buy or negotiate a new one.
Since canceling your coverage is not the best idea, there are of course other alternatives to simply canceling it. You can, of course, reduce your coverage amount or even apply for a new medical exam. Insurers take your life choices, weight, and health into account when determining premiums.
So if you change your life choices, stop smoking or drinking, and reduce weight, you may be able to qualify for new premiums. This can, of course, differ from company to company, so be sure to ask.
Although life insurance is one of the many necessities in your life, you can cancel it at your own pleasure. Whether it is due to some unfortunate circumstance or because you simply feel like you don’t need it anymore, canceling your life insurance is not very hard but it can take a long time if you don’t know what you’re doing.