Who can cancel a life insurance policy?
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UPDATED: Nov 26, 2011
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The insured or person who is being covered must cancel their own individual life insurance policy. You can also cancel the life insurance policy of a parent or relative if they are unable to make rational decisions and you have been given power of attorney. While you may certainly purchase life insurance for your mother or father, you still need their consent and they must complete a series of questions and sign the application before the policy becomes active.
Canceling a life insurance policy is usually due to financial reasons and should be thoughtfully considered because there are several steps involved. You should read and understand the terms of your policy thoroughly to avoid any necessary stress or surprises that may result after you cancel your life insurance policy.
How do I cancel a life insurance policy?
There are many steps involved with canceling life insurance. You should be prepared to answer many questions surrounding your decision. Life insurance agents do not like to lose customers, so they will try to retain your business. Make sure you are certain with your choice to end the contract.
You also need to be aware of any financial obligations you have or will have upon canceling your life insurance policy. For example, whole life policies have cash value attached. If you want to cancel your life insurance policy to collect a cash payout, you need to understand the financial implications. The amount of some life insurance payouts can be substantial. You may be required to report the payout as taxable income. If you are canceling a term life policy, this option does not apply.
Contact your life insurance agency and speak with a representative. You cannot request a cancellation over the telephone, but you can verify the correct policy information and advise them of your desire to cancel. They should note your account accordingly and provide you with answers to questions before the call ends.
Once complete, draft a letter to your insurance agency and include your name, policy information and effective cancellation date. In the letter, express your desire for follow-up and confirmation of your policy cancellation. The letter should be brief, but detailed and provide an explanation as to why you are requesting the cancellation.
The letter should also reference any refund you are due or additional payments that you are responsible for making. Send the letter certified with a return receipt. You will be notified when it reaches the insurance agency.
For their part, your insurance agency may request that you sign documents that they send to you because of your request. This may delay the otherwise swift process because you cannot fax or scan these papers, they can only be sent
After the cancellation process is complete, you should receive notice from the insurance agency advising you of the status. You may then stop making payments on the policy. You should review the paperwork carefully and store in a safe place.
Canceled life insurance policies should be retained for at least one year. Whole life insurance policies or any policy that granted cash should remain with your current insurance information for a minimum of six years.
Can I just stop paying my monthly premium and be canceled?
Yes, in fact it is a guaranteed way to ensure prompt and definite cancellation of a life insurance policy. However, there are negative implications surrounding this type of process. The most important being how this decision will affect your credit. Another important issue revolves around refunded money. If your policy is canceled for non-payment, you may forfeit your rights to receive payment.
How will I know if my life insurance has been canceled?
Most insurance agents will begin with a friendly phone call advising you of your delinquent status. Others will skip the pleasantries and forward a letter to your attention. The letter will advise of the need to make your payment in accordance with your policy guidelines. If you fail to respond, you may receive a telephone call from an agent. You might also simply receive a letter in the mail advising you that your premium has been canceled due to non-payment.
Can I suspend my life insurance without canceling the entire premium?
No, once you purchase your life insurance policy, you are bound by the terms of the contract. If you have a term life policy, you can purchase in one-year increments, this may give you a little breathing room, but because term life policies do not have any cash value, you will not be eligible for a payout after you cancel.
If you feel you do not need the insurance after a period of time has elapsed, you can opt out of the renewal process. This will help you avoid letting the policy lapse and will assist you if you decide to purchase life insurance again.
Life insurance is a necessity for some. Still others may view it as an additional monthly expense that applies to the elderly. The fact is; life insurance is really something that everyone should think about and decide on.
With the cost of funerals rising every year, it is your duty to act responsibly. However, when finances are tight and your budget is being stretched past its capacity, you may need to reevaluate your spending habits and trim some of the excess which sometimes means having to cancel a life insurance policy.
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