Life insurance is purchased during major milestones, such as financing a house or a car purchase. It helps to pay off outstanding loans in case of the policyholder’s absence. However, when the policy nears its end or if the policyholder considers canceling it, they need to evaluate their outstanding debts and future financial obligations.
|Factors to consider before canceling life insurance|
|Outstanding debts like mortgages, credit cards, and student loans|
|Future financial obligations like college tuition or wedding expenses|
|Daily expenses like groceries and gas|
|Ability of the spouse or partner to support themselves and children without the policyholder’s income|
|Burial expenses that average around $10,000|
|Conversion of term life insurance to whole life insurance|
Before canceling life insurance, one should consider various factors, including outstanding debts, future financial obligations, and daily expenses. If the policyholder’s family can afford daily expenses, pay their bills, and retire comfortably without using life insurance funds, they may consider canceling their policy. However, if the policyholder’s heirs will be hit with a hefty estate tax bill or have a pre-existing medical condition, they may want to consider purchasing whole life insurance.
Whole life insurance is more expensive than term life insurance, but it could provide liquid assets to the beneficiaries without liquidating the policyholder’s property, such as their house. It can also help those with significant medical issues to obtain coverage without having to prove insurability.
However, converting a term life insurance policy into a whole life policy is not suitable for everyone. If the policyholder outlives their doctor’s prognoses, the value of a whole life policy diminishes accordingly.
Overall, canceling life insurance should be a well thought out decision based on the policyholder’s outstanding debts, future financial obligations, and their family’s ability to support themselves without their income.
- Investopedia. How To Tell When You Should Cancel Your Life Insurance
- NerdWallet. How To Cancel Your Life Insurance Policy
- MarketWatch. How To Cancel A Life Insurance Policy
- ICICI Prudential Life Insurance Company Limited. How To Cancel Your Life Insurance Policy
- The Guardian Life Insurance Company of America. Should You Cancel Your Life Insurance In 2023?