However, regardless of how long you’ve had life insurance, a change in personal circumstances can leave you with a decision to make on whether to keep a policy or cancel it. There are many reasons people think about cancelling life insurance, but is it always the best approach?
In this guide, we explore some of the reasons you might want to cancel your life insurance, whether it’s best to cancel or keep your policy, and how to do so if cancelling is the right option for you.
Reasons for cancelling a life insurance policy
Many people who consider cancelling their life insurance have recently experienced a significant change in their personal circumstances that has caused them to reflect on their cover. Some of the most common reasons people consider cancelling a life insurance policy include:
- Retirement - Those who retire in a position of financial security may decide they no longer need life insurance as they become more financially stable or pay off their mortgage.
- Cost - Although life insurance typically costs a few pounds a month, some people may see it as an unnecessary outgoing, especially if their payments increase.
- Loss of dependants - If a family member unexpectedly passes away, or children become financially independent, some policyholders will consider whether they still need cover.
- Inherited money - Inheriting a large amount of money could mean some policyholders no longer worry about what they can leave their dependants.
- Divorce - Couples who have recently separated may wish to cancel their joint life insurance policy and instead arrange a single policy for themselves.
Should I cancel my life insurance?
Whatever the reason for considering cancelling a life insurance policy, it’s not a decision that should be taken lightly, as it does come with some consequences that need to be considered.
For many, the fact they no longer have to pay for their insurance will be a bonus, but it’s also worth considering that you will no longer have that safety net of financially protecting your family if you should pass away.
Before cancelling life insurance, you should assess whether your family would be able to keep up with your current financial responsibilities in your absence. If they would struggle to cover these costs, it could be a better option to speak to your insurer about alternative options such as reducing the amount you pay each month, rather than cancelling your life insurance completely.
Do I still need life insurance after I’ve retired?
If you retire in a comfortable financial position and you don’t have issues around estate settlement, paying bills or daily living expenses, then you may feel that you no longer need life insurance.
However, if you retire with debt or have family that are financially dependent on you, then it may be a good idea to continue your life insurance policy during your retirement to retain that peace of mind.
Do I need life insurance after my home has been paid off?
Some people may choose to cancel their life insurance policy once they have paid off their mortgage, as they no longer worry about payments on their house being covered if they pass away.
In cases where the original grounds for setting up a life insurance policy may have changed, there are still many other factors that should be taken into consideration before cancelling.
The most notable reason for caution is that cancelling life insurance means you and your family will lose the protection the cover affords you. Life insurance can help with funeral costs and everyday money worries, giving your family a sense of financial security should anything happen to you.
Do I need to cancel if I wish to take out more cover?
Sometimes our circumstances change and you may decide in the future that you need to take out more cover than you did initially. Cancelling your policy and taking out a new one with more cover may be one option however many policies come with options allowing you to increase your cover within certain limits, without having to provide any further medical information.
It's also worth noting that if you do cancel your policy and later find you need cover again, your health could have changed and you'll be older so it's likely to cost more. You may even find you are unable to obtain further cover, so if you're thinking about cancelling to take out a new policy make sure the new policy is in place before cancelling the old one.
Speak to a financial adviser
If you are still unsure whether you want to cancel your policy then it may be worth speaking to a financial adviser before doing so. An adviser will be able to help you with some of the alternatives that could be available and can advise as to whether you still need the cover or not.
If you don't have a financial adviser, our partners at LifeSearch will be able to offer you independent, non-bias advice and discuss the different options available. Request a call back.
How to cancel a life insurance policy
If, after careful consideration, you feel that cancelling your life insurance is the right option for you, there are steps you should follow to cancel.
Firstly, it’s important to check the terms and conditions associated with your policy, as life insurance policy cancellation rules can differ.
Many insurers offer a 30-day cooling-off period. This means that if you change your mind within 30 days of the start of your plan, you’ll get a refund on the premiums you have paid.
Outside of this 30-day period, you should get in touch with your provider with confirmation that you wish to cancel your policy. You can get in touch via phone, or write to your insurer with confirmation. Make sure you keep track of any correspondence and confirmation of your cancellation.
Cancelling life insurance FAQs
Do you get a pay out if you cancel life insurance?
Life insurance payouts only occur after the policyholder passes away. That means that regardless of how long you’ve been paying into your policy, if you choose to cancel it, you won’t receive a payout.
If I cancel my life insurance policy, do I get my money back?
If you take out a policy with LV= and cancel within 30 days of your plan starting, we will refund any premiums paid. This may not always be the case with every provider however so you should check the T&C's before purchasing. If you choose to cancel your plan at other time outside the mandatory 30-day cooling off period, you generally won’t receive any refunds.
What happens next when you cancel life cover?
Once your life insurance policy has been cancelled, your cover will end, and you won’t be expected to pay any further premiums.
Thinking of taking out a life insurance policy? Protect your loved ones with life insurance from LV=. Premiums start from as little as £5 per month.