At What Point Should Life Insurance Be Discontinued?
Life insurance policies are bought for various reasons such as replacing income, covering debts, or sending a child to college. It makes sense to cancel a life insurance policy if the need has been satisfied, such as paying off debt or children growing up. Although it is easy to cancel a policy, the process varies depending on the type of life insurance policy. People may discontinue life insurance policies due to financial struggles, including job loss, stagnation, and inflation. Cancelling a policy is not the only option available for those struggling financially. Depending on the type of insurance policy and when it was purchased, there are other options to consider:
|Policy Type||Cancellation Process|
|Term Life Insurance||Stop paying premiums and notify the insurer through a letter or call|
|Whole Life Insurance||Surrender the policy to opt-out or cancel it, surrender fees may apply|
Another option for those who do not want to surrender the whole life insurance policy is to consider a tax-free life insurance policy exchange or selling the policy. However, these processes can be complicated and should be approached with caution.
It is important to remember that life insurance policies should be part of a greater financial strategy to provide a secure future for yourself and your loved ones. Cancelling a policy may make sense if there are better ways to invest the money that would have been paid in premiums. When cancelling the policy, it is important to consider the consequences. Premium payments will be forfeited in most cases, except for whole life insurance policies that have built-up equity over time.
Overall, discontinuing life insurance policies depends on the type of policy, financial situation, and future financial goals.