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Should You Cancel Your Life Insurance? What to Know

Photo by Andrea Piacquadio

There are many reasons you may want to cancel your life insurance. Could it be because you can’t afford the premiums? Or perhaps you’re cutting down on spending and the policy premiums seem like the only expense you could do without?

Could it be that you are worried your insurer won’t honor their end? Or is it because you’ve run into a better policy or your new job offers a group scheme?

The most probable scenario, once you stop making monthly premiums, is that your life insurance coverage may be terminated as well. Not only that, you may end up losing all the money you’ve plowed into the cover.

Even worse is that your insurer may not allow you to resume with the policy and you may be forced to start all over.

To avoid falling into these pitfalls, here is what you need to know about canceling your life cover. 

When to cancel – cooling-off period vs after cooling-off period

Every insurance policy, including a life insurance policy, has a cooling-off period. It’s a set duration during which you are allowed by law to cancel your policy and still receive already remitted premiums.

In the UK, the cool-off period for life insurance is 30 days from when the policy commences or once you receive your policy documents.

Typically, if you cancel your policy within this period your insurer should refund all the premiums paid. However, some insurers may charge a small fee in the form of an administration fee.

Some insurers provide a longer cooling-off period. Check your policy’s terms and conditions and remember to inform your insurer in good time of your intention to cancel.

You can still cancel your policy after the cooling-off period has elapsed, however, whether or not you’ll get a refund of your premiums depends on your insurance policy.

You will likely receive a refund of your premiums if you haven’t made any claims in the policy year. However, the insurer will charge an administration fee.

Inform your insurer if you want to cancel. Canceling a direct debit without informing your insurer will only leave you owing the insurer unpaid premiums.

Consider the benefits

Life insurance is designed to provide your dependents with financial aid in the event you pass away or become unable to provide for them. The magnitude of its importance to your family is reason enough to make you reconsider canceling your policy.

Terminating your cover may expose your dependents to unwanted suffering. Keeping your cover means your family will receive a lump sum or regular income in the event you pass or are diagnosed with a terminal illness.

Are you getting a better deal?

You might have run across a life insurance policy that is better than your existing cover and are thinking about canceling. It might not be a good idea if you consider certain factors such as your age and the amount invested in the existing cover.

Life insurance costs less when you are young than when you are old. This is because insurers calculate your premiums based on the likelihood of you making a claim. You will pay more for a new policy if you decide to take it later.

Also, as we age we develop various age-related complications which may further drive up the cost of life insurance. In extreme scenarios, you may even not be able to get a new policy based on your health.

Besides risking buying a new policy at a higher cost, the new policy you’ve just seen online may be misleading. Sometimes, the figure quoted may be inaccurate especially if you didn’t provide exhaustive information.

Do not cancel your existing policy before speaking to an expert.

Canceling because your circumstance has changed

You may have gotten a new job where your employer provides a group cover, or are moving abroad, or you are getting a divorce and your Joint-Life Insurance cover seems too complicated.

All these circumstances might force you to reconsider your life insurance cover. However, each circumstance is unique and should be treated as such.

For instance, terminating your life insurance cover because you’ve got a group scheme from your employer may not be the best move. Remember, your group cover is in force as long as you’re still an employee. Once you quit or lose your job your group cover is terminated.

Evaluate your options with the help of an expert before making any decision.

Cancel or not cancel?

There are many reasons why you would consider canceling your life insurance policy. Most of these reasons are valid and compelling. However, you might lose more than you think by canceling your existing life insurance coverage.

Before you decide to cancel, take your time and think about what you might lose or gain. Don’t forget to seek expert advice if you have any doubts.;tid=1;dt=6;

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