Can You Cancel Term Life Insurance Any Time?
Life insurance policies may need to be canceled for various reasons, such as financial struggles or fulfillment of the policy’s need. Cancelling a life insurance policy is relatively easy, but the process depends on the type of policy you have. If you have a term life insurance policy, you can cancel it anytime by stopping the premium payments and informing your insurer about it through a letter or phone call. The policy will automatically cancel when the term ends if you do not stop it.
On the other hand, if you have a whole life policy, you may receive a lump sum payment from the insurer if you have built up equity in the policy by paying into it for a decade or more. However, you may have to pay surrender fees if you cancel the policy in the first 10 or 20 years.
If you do not want to surrender your whole life insurance policy, you can consider a tax-free life insurance policy exchange, which allows you to transfer your policy into an annuity or long-term care policy without paying taxes. Alternatively, you can sell your policy to a reputable broker, which can provide a cash infusion but may take a few months to sell.
|Type of Policy||Cancellation Process|
|Term Life Insurance||Stop paying premiums and inform insurer via letter or phone call|
|Whole Life Insurance||Surrender the policy for a lump sum payment or consider a tax-free exchange or selling to a broker|