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Can a life insurance policy be cancelled because of illness?

Don't miss these facts...
  • A legitimately issued life insurance policy cannot be canceled due to an illness that developed after it was issued
  • If the insured knew of an illness and failed to disclose it, there can be a problem
  • Once issued, a life insurance policy can only be terminated for non-payment of the premium
As long as you were honest and truthful when you applied for your life insurance policy after it is issued, the only way it could be canceled by the insurance company is if you fail to pay the premiums.

Life insurance is not like health insurance or auto insurance, where the insurance carrier can raise your premiums if you have too many claims or even outright drop your coverage.

If you have given accurate information on the application and not attempted to falsify medical information or other issues, your policy should stay in force for the rest of your life if it is whole life, or for the remaining term if it is term insurance.

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How You Could Lose Coverage

adobestock_86115954-1600x1600If you miss a premium payment, the insurance company will most likely notify you that you need to pay. If you fail to make a timely payment on your policy, it could lapse.

If your plan is paid up or you are using the cash value to pay the premium, this will not be a problem. However, if you fail to make a needed payment the policy will lapse.

Reinstating a lapsed policy may require you to requalify for the coverage. If this is the case, you may find that the insurance company will not allow you to reinstate, based on your current medical condition.

That is why it is important to keep policies paid on a timely basis, especially if you have an illness that may render you uninsurable.

Purchasing life insurance is something that must be done when a person is healthy and not anticipating death in the near term. It is purchased to cover an unexpected event, not one that is inevitable in the very near term.

Whole Life Policy vs Term Life Insurance

If you have a whole life insurance policy, and you keep the premiums paid, the policy should last for the rest of your life. The insurance company cannot cancel your policy due to illness.

If on the other hand, you have a term life insurance policy and the term is running out, to get coverage again, you will have to apply again and meet insurability requirements.

If you are terminally ill at the time or have a serious health problem the insurance company can decline your new application.

If you are terminally ill at the time or have a serious health problem the insurance company can decline your new application.

Another Way You May Lose Life Insurance Coverage

If it is determined that you provided false or misleading information on the application you submitted to get your life insurance coverage, the carrier can contest a claim if they become aware of it.

When you apply for a life insurance policy, you must be honest and truthful about everything, including your medical history and current medical condition. As long has you have been, and you pay your premiums, the policy cannot be

As long has you have been, and you pay your premiums, the policy cannot be canceled, even if you are later diagnosed with terminal cancer or some other illness.

Life insurance policies have also been challenged for non-completion of the application. You should be aware of this though. The insurance company should have notified you of this earlier, so you could correct it. Do not ignore these notices.

Other Things to Keep in Mind When You Become Ill and Have Life Insurance

AdobeStock_111046064-1600x1600Making sure the policy is paid and kept in force, will help your survivors for both the short term and long term after you pass. Depending on the policy you have, you may be able to get financial help from your policy, while you are still alive.

  • If your life insurance policy has accumulated a cash value, you can take a loan against the cash value to help pay some of your medical bills or to use in another way. A loan against the cash value, will lower the death benefit by the amount borrowed.
  • If your policy contains an accelerated death benefit rider, you may be eligible to receive a portion of the death benefit while you are still alive. This could be in a lump sum or installments depending on your policy language. When your life expectancy is less than 24 months, these proceeds are non-taxable.
  • A newer concept with life insurance policies is the viatical settlement company service. You may be able to sell your life insurance policy to the company. They will pay between 40 and 85 percent of the face value, and you will have needed cash for your own use. The death benefit will be paid to the company upon your death, not to your beneficiaries.

So, to sum things up, an insurance company cannot cancel your life insurance policy due to illness, as long as you were honest on your application.

As long as you pay your premium, and do not allow any lapse in coverage, you will not lose your insurance.

If you become ill after getting your life insurance policy, and then you let your policy lapse due to non-payment, you will not be able to get your coverage reinstated.

It is critical to keep up with premium payments on life insurance policies, especially if you have become ill since getting the coverage.

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