Canceling Your Life Insurance: What Happens to Your Money?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Can I Cancel My Life Insurance Policy At Any Time?

In most cases, you can cancel a life insurance policy anytime. However, there may be some exceptions to the rules regarding a life insurance cancellation policy. For example, if you have a whole life insurance policy, you may be obligated to pay surrender charges or fees if you cancel your policy. These charges can vary, but they are typically between five and ten percent of the policy’s face value.

How To Cancel A Life Insurance Policy

The process of canceling a life insurance policy will vary depending on the insurer. However, in most cases, you can contact your life insurance company and request to cancel your policy. You may be required to provide written notice or fill out a cancellation form.

What Happens to My Money If I Cancel My Policy?

If you cancel your life insurance policy, the insurance company will send you a check for your policy’s cash value. The cash value is the money you have paid into the policy minus any fees or charges. In most cases, you will receive this money within 30 days of canceling your policy.

Cancel Life Insurance

Do You Get Your Money Back If You Cancel Your Life Insurance Policy?

If applicable, the insurance company will refund you when you cancel your life insurance policy. However, this refund will be less than the total amount you paid into the policy.

This is because the insurance company has to pay for the costs of administering the policy and any fees associated with canceling the policy.

In most cases, you can get a refund of the premiums you have paid into the policy. However, there are some exceptions.

When You Wouldn’t Get A Refund

For example, if you have a term life insurance policy, you will not receive a refund when you cancel the policy. This is because term life insurance policies do not build up cash value.

When You Would Get A Refund

Suppose you have a permanent life insurance policy. In that case, you may get a refund of the premiums you have paid into the policy, minus any fees associated with canceling the policy.

Permanent life insurance policies (whole and universal life insurance) do build up cash value over time, so you may be able to receive a portion of this cash value when you cancel the policy. Permanent policies include:

Related Reading: Can I Sell My Life Insurance Policy For Cash?

Things To Consider Before Canceling Life Insurance

Before you cancel your life insurance policy, you should consider the following factors:

  • The costs associated with canceling your policy: as we mentioned above, you will not receive a full refund of your premiums when you cancel your life insurance policy. Sometimes, the fees associated with canceling your policy may be more than the refund you receive.
  • The cash value of your policy: if you have a whole life insurance policy, you may receive a portion of the cash value when you cancel the policy. This money can help pay for things like final expenses or college tuition.
  • Your current financial situation: if you are in a financial situation where you need the death benefit from your life insurance policy, then canceling the policy may not be the best option. Sell the policy for a lump sum of cash instead.

Before Cancellation, Consider Selling It

If you are considering canceling your life insurance policy, you may want to consider selling it instead.

When you sell your life insurance policy, you will receive a lump sum of cash, typically more than the policy’s cash value.

This money can be used for things like paying off debt, funding a child’s education, or anything else you may need it for.

If you are interested in selling your life insurance policy, we can help. We are a life settlement company that buys life insurance policies from people who no longer want or need them.

We will work with you to get the best price for your policy and ensure the process is as smooth and easy as possible.

Bottom Line

If you consider canceling your life insurance policy, you should contact your insurance company to discuss your options. They will help you understand the costs associated with canceling your policy and your options for receiving a refund.

Canceling Your Life Insurance

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Frequently Asked Questions

Do You Get Your Money Back If You Cancel Your Term Life Insurance Policy?

Unless you’ve purchased a Return Of Premium Term Life Insurance Policy, you will not get your money back at the end of the term or at any time you cancel the policy. Selling the term policy may be an option.

Do You Get Your Money Back If You Cancel Your Whole Life Insurance Policy?

When canceling whole life insurance, you usually get a refund of your premiums minus any fees or charges.

Do You Get Your Money Back If You Cancel Your Universal Life Insurance Policy?

If you have a universal life insurance policy, you will usually get a refund of your premiums minus any fees or charges.

What Are The Fees Associated With Canceling My Life Insurance Policy?

The fees associated with canceling your life insurance policy will vary depending on your policy type and the insurer you are with. However, you will most likely be charged a cancellation fee and a surrender charge. Cancellation fees are typically a percentage of the premiums you have paid into the policy. Surrender charges are usually a percentage of the cash value accumulated in your policy.

Can I Get A Refund If I Cancel My Life Insurance Policy Within The First Year?

In most cases, you will be able to get a refund of your premiums if you cancel your life insurance policy within the first year. However, there may be some fees associated with canceling the policy.

Can You Cash In A Life Insurance Policy That Is Paid Up?

If you need access to funds and have a universal or whole life insurance policy that is paid up, cashing it in may be a viable option. However, it is essential to understand that by doing so, you will forfeit the death benefit and may face taxes on the amount received.

Should I Cancel My Whole Life Policy?

There is no one-size-fits-all answer to this question. You should consider the costs of canceling your policy, the cash value of your policy, and your current financial situation before making a decision.

How do I cancel my American Income Life Insurance Policy?

If you need to cancel your American Income Life Insurance Policy, you can do so by contacting customer service at 800-433-3405.

How do I cancel my Primerica Life Insurance Policy?

If you need to cancel your Primerica Life Insurance Policy, you can do so by contacting customer service at 800-257-4725.

How do I cancel my State Farm Life Insurance Policy?

If you need to cancel your State Farm Life Insurance Policy, you can do so by contacting customer service at 877-292-0398.

How do I cancel my Transamerica Life Insurance Policy?

If you need to cancel your Transamerica Life Insurance Policy, you can do so by contacting customer service at 800-797-2643.

How do I cancel my Northwestern Mutual Life Insurance Policy?

If you need to cancel your Northwestern Mutual Life Insurance Policy, you can do so by contacting customer service at 866-950-4644.

How do I cancel my New York Life Insurance Policy?

If you need to cancel your New York Life Insurance Policy, you can do so by contacting customer service at 800-225-5695.

How do I cancel my Globe Life Insurance Policy?

If you need to cancel your Globe Life Insurance Policy, you can do so by contacting customer service at 844-726-4372.

I want to cancel my life insurance policy. What should I do?

Before canceling your life insurance policy, explore the possibility of selling it through a life settlement, which might allow you to recoup some money. If you have a term life insurance policy, canceling it typically means you won’t receive any money back. However, with whole or universal life insurance, there might be a cash value component, but be aware of potential surrender charges. It’s worth considering a penalty-free withdrawal from this cash value, if available, before making the decision to cancel. This approach allows you to maximize the financial benefit from the policy while still ending your coverage.

If I cancel my life insurance policy, why are they charging me $1,800?

The $1,800 charge you’re facing is likely a surrender charge, common in many life insurance policies, especially whole or universal life policies. These fees are imposed for canceling the policy before a certain period, often detailed in the policy’s terms. The amount and duration of surrender charges vary by policy. This charge is meant to recover the insurer’s initial costs and discourage early policy termination. Also, check for any penalty-free withdrawal provisions.

Can I get the money I contributed if the company canceled my life insurance policy?

If a company cancels your life insurance policy, whether you can get back the money you contributed depends on the type of policy you had. With term life insurance, there are typically no refunds of premiums paid if the policy is canceled, as these policies don’t accumulate cash value. However, if you had a whole life or universal life policy, you might be entitled to receive the cash surrender value, which is the cash value accumulated minus any surrender charges.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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