Life insurance is a long-term financial product, and there may come a time when you no longer need it. If you’re considering canceling your life insurance policy, there are a few things you need to know.
When Can You Cancel Your Policy?
You can cancel your life insurance policy at any time. However, there may be surrender charges if you cancel your policy within a certain period of time, typically the first few years. These charges are designed to recoup some of the costs that the insurance company incurred in issuing the policy.
How Do You Cancel Your Policy?
To cancel your life insurance policy, you’ll need to contact your insurance company and provide them with a written request. You can usually find a cancellation form on your insurance company’s website.
In your request, be sure to include the following information:
- Your name and policy number
- The date you want your policy to be canceled
- Your reason for canceling
What Happens After You Cancel Your Policy?
Once your policy is canceled, you’ll no longer be covered by life insurance. If you die after your policy has been canceled, your beneficiaries will not receive any death benefit.
If you have any questions about canceling your life insurance policy, be sure to contact your insurance company.
Here are some additional things to consider when canceling your life insurance policy:
- Surrender charges: As mentioned above, there may be surrender charges if you cancel your policy within a certain period of time. These charges are typically a percentage of the premiums you’ve paid.
- Tax implications: If you cancel your policy and receive a refund of any premiums you’ve paid, this may be considered taxable income. The amount of taxable income will depend on the type of policy you have and how long you’ve had it.
- Other options: If you’re considering canceling your life insurance policy, there may be other options available to you. For example, you may be able to convert your policy to an annuity or borrow against the cash value of your policy. It is also possible to sell your policy to a third party. This is called ‘Life Settlement’. You can learn more about Life Settlement in our other blog posts.
If you’re not sure what to do, it’s a good idea to speak with an insurance professional to discuss your options.