Everyone hopes to live to old age and enjoy the best of what life has to offer. Perhaps, watch your kids settle down and have your grandkids come over and reminiscence of your younger days. Better still, become a globetrotter, and pursue your passions. The essence of having life insurance is to cushion your loved ones against unnecessary financial obligations following your death.
Sometimes, there may come a time when you feel life insurance is no longer a viable option for you. Maybe because you have enough assets to your name and think death eventuality may not offer the best. In other instances, you may encounter a financial hurdle, and you feel you cannot pay the premiums comfortably. Additionally, you may also opt for cancellation if the financial need you took life insurance to cover is no longer a bother, and you have it under wraps, like a debt. Whatever your reason is, you should carefully weigh all options on the table before taking the final bow.
Consult First
Making up your mind about canceling your life insurance is one thing. Actualizing the thought is a whole different game plan. When you want to cancel your life insurance, first consult with an insurance guru who has the knowledge and expertise in the field. They have the know-how on whether cancellation is an advantage or disadvantage to you.
Another Cover is Also Okay
Sometimes, you may cancel your life insurance if you have a better pricing option. In this scenario, you may find the first insurance plan too expensive for you to continue funding it. On the other hand, you feel you can comfortably pay the second offer and derive significant benefits just as the first one. However, canceling your plan before confirmation of the second life insurance cover would be a wrong move. Kindly ensure you have complete approval of your intended premium rates and you have total coverage.
You put yourself at risk on the financial ax that may befall you, which the life insurance gave you protection. Additionally, remember when you cancel your current life insurance hoping that you will reapply it later, you will pay higher premiums.
Lower Your Premiums
Sometimes, you may have a financial setback, and paying your premiums becomes an uphill task. In such a scenario, you can also opt to approach your insurer and ask them to lower your insurance costs. Consequently, it will also reduce your policy premium rates, which you can pay comfortably.
Therefore, you will continue to enjoy the protection the life insurance offers. The payout, however, will be lower than your first intended plan.
Another Medical Evaluation
When it comes to a life insurance cover, the premium may vary from one individual to another. In this regard, age, health, and even your occupation play a significant role in effectively calculating life settlements. Therefore, the more you age, the higher your premium rates. Additionally, you will pay a higher rate if you are predisposed to medical conditions.
Suppose you embark on a healthier lifestyle, which translates to better health; you can ask for another medical reevaluation. Eventually, you may pay lower premiums as your health is better.
Cash Value of Your Policy
If you have whole life insurance cover, you are eligible for the cash value policy. Therefore, you can consult your insurer if the cash value of your policy can facilitate premium payment.
Canceling a Permanent Insurance Policy
It takes more planning to cancel permanent life insurance. This is due to the fact that there are many variables to take into account, including cash value, surrender charges, taxes, and even other options for getting rid of your undesired policy.
Surrender fees will probably play a role in the decision. In the beginning of your insurance, these are frequently very high and progressively decrease with time. The surrender fees on a newer policy, which hasn’t had much opportunity to accumulate large cash, may be so high as to completely deplete your cash value. You won’t receive a refund if you decide to cancel the coverage in that scenario. You might get a cash payout on an older insurance with a high cash balance after the insurer deducts its surrender charges. These proceeds can be taxable if they exceed the total premiums, you have collectively paid.
You may ask your insurer to estimate the surrender value of your policy, or the sum you should receive upon canceling your coverage, to get a handle on these specifics. With such information in hand, you can weigh a cancellation against other options such as performing a tax-free 1035 exchange or selling the policy through life settlement.
Go Ahead Anyway
If you have made up your mind to cancel, you will have to keep in mind a few aspects. For instance, for term insurance, you can cancel the policy at any time. You can quit making the premiums until the lapse of your grace period. A whole life insurance cover, however, will differ on the discontinuation. Plus, you have the upper hand on cancellation during the free look phase, which is eligible for up to 30 days after purchasing your policy. During that period, you will also get a refund.
When you opt to cancel, you will stop paying the premiums. Additionally, you can also write to your insurer seeking a cancellation of the life insurance. It is essential to note that after cancellation, you no longer have the comfort of enjoying life insurance benefits.
Plus, with the cancellation of a term insurance cover, you will not get a refund as it lacks a cash value policy. With a long-term life insurance cover, you have surrender fees, which decrease gradually from the onset of the first year.
The above options are a go-to idea when you first think of canceling your life insurance. Furthermore, remember that you have made a considerable investment through the premiums; therefore, make an informed decision before quitting.