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Different insurers have different termination rules for life insurance policies. Knowing how to properly cancel your life insurance policy has great benefits. The insurer cannot prevent you from canceling your policy because it is an ongoing service and relies on your ongoing payments. However, failure to follow the proper policy cancellation rules may result in charges and loss of financial opportunities.
For some policies, cancellation may simply mean writing a cancellation letter to the insurer and stopping payments. Other guidelines, such as lifetime, may involve a more complex process.
How do I end my life insurance policy?
In most cases, you can contact your insurance carrier and tell them you want to cancel your life insurance policy. You may use the word “return” instead of “cancel”. This is because these terms are interchangeable in life insurance. Written notice is usually required. Most insurance companies, including Ethos, require written notice for most policy types.
However, sometimes you can cancel term life insurance simply by stopping payments. Contact your insurance company and let them know you would like to return the policy. Your agent will tell you in writing if your request is necessary (in many cases). After that, it’s usually a matter of processing the request and sometimes charging a cancellation fee.
Do I get my money back if I cancel life insurance?
If you cancel life insurance, you generally do not get your premium back. For whole life insurance, you may receive a cash value when you cancel the policy after all fees have been paid. Term insurance does not have a cash value feature, so there is no money to be collected when canceling this type of policy.
In rare cases it may be possible to purchase a premium driver for term life insurance. However, they generally only refund premiums when the policy expires and do not cancel early. However, life insurance policies usually have a short free consultation period during which you can cancel and get your payment back. This free viewing period rarely lasts longer than the first or second payment.
Understanding how insurance works can help make this process smooth.
What happens if you cancel life insurance early?
Assumes cancellation within the free viewing period. In this case, you will receive a refund of the premium you paid, which is essentially the same as if you had not purchased the insurance. Pre-look periods vary by state and insurer. If you cancel after this period, you will not be entitled to compensation. But before deciding to quit smoking, it’s important to ask yourself, “Do I need life insurance?”
If the answer is yes, the next step is to determine how much insurance you need. Instead of canceling, you can reduce your coverage and save on premiums.
Another effect of early termination is that policy payouts do not materialize. The investment portion does not continue to grow (in the case of a whole life insurance policy). In most cases, you will not get your premium back. As a result, you may end up paying in part without using the product.
Can you cancel life insurance at any time?
Yes, the policyholder may cancel life insurance at any time. However, there may be procedures depending on the type of insurance company and policy. It is common for insurers to require verbal or written notice of their intention to return or cancel coverage. A cancellation fee may also apply. Term life insurance policies are usually the easiest to cancel.
Depending on the circumstances, there are alternatives to canceling to save money while still maintaining the policy. These considerations can be important as you get older, as premiums increase with age.
Alternatives to Policy Cancellation
Knowing how to cancel life insurance is only half the battle. Sometimes canceling the policy is the best way to get what you want, but there may be alternatives. Whole life insurance policies can often be sold, modified or mortgaged (using their cash value). Term policies have fewer options, but depending on your insurer, you may be able to negotiate a lower premium for a lower payout.
When a term policy has a built-in conversion tab, the policy can be sold on the marketplace. You can still sell your policy at a lower price without this addition.
If you decide to cancel or return your insurance, heed Ethos’ advice on what you need to know before canceling.
