Changing personal and financial circumstances may push a policyholder to consider canceling their life insurance policy. Policyholders may opt to let their policy lapse by discontinuing premiums, or they may surrender a cash value policy to receive its surrender value. If you’re on the fence about your life insurance policy, keep reading to learn when and how you should cancel it and some alternatives to consider.
Canceling a life insurance policy may take a few different forms depending on the type of policy and how long you've had it. Based on your situation, you can consider the following options:
Don’t wait until it’s too late. Help cover yourself and your family with affordable coverage from Aflac.
While canceling a life insurance policy may sometimes result in a net loss, there are some occasions when it may be the right option:
Your children may have grown up, or you may no longer have dependents who rely on you to provide for them. In such instances, you may find that your death benefit is not worth the amount you’ll save on premiums.
Layoffs, rent increases, or inflation may cause a policyholder to cut back on expenses to be able to afford necessities. If you've already pared down discretionary spending or reduced monthly expenses, you might consider giving up your life insurance policy.
Someone with a business debt or mortgage may get a life insurance policy to make sure loved ones can help pay off these debts in the event of the policyholder’s passing. However, those who have fully paid off these debts may not need life insurance anymore.
Whole life insurance (or other permanent life insurance policies) may be part of your plans for your future. However, a change in the market, tax laws, or personal circumstances may motivate you to cancel your life insurance in favor of other strategies.2
If you’re thinking of canceling your life insurance policy, here are the steps you can take based on the type of policy you have:
1. Start by evaluating your reasons for cancelation and considering how important life insurance coverage is to you.
2. If you decide you don’t need life insurance anymore, you can contact your insurance provider and inform them of your decision to terminate the policy. You may need to fill out a cancelation form.
1. Consider how long you've had the policy and find out the cash value it has accumulated, as well as what the surrender fees may be.
2. If you have a newer policy with little to no cash value, inform your life insurance company.
3. If you have an older policy with considerable cash value, contact your insurer and inform them of your wish to surrender the policy. They will inform you of any requirements or fees.
4. Fill out any surrender forms and provide supporting documentation if necessary.
5. Once you submit the forms and your surrender application is processed, you should hear back from the insurance company.
Here are a few factors to consider before you cancel your life insurance policy:
Canceling a life insurance policy may not be the right decision for everyone. Here are some alternatives to explore before making your decision:
If you need coverage but can’t afford your current premiums, consider contacting your life insurance company to discuss your options. The insurer may be able to temporarily reduce your coverage amount to make premiums more affordable.3
Whole life insurance policyholders in a cash crunch can withdraw from or borrow against the policy’s cash value. Keep in mind that a policy loan will incur interest, but not as much as lenders typically charge for loans. If you pass away before you repay the loan, your loved ones will receive a lower death benefit.
Your premiums may be higher because you were in poor health when you bought your life insurance policy. Try requesting a new medical exam that may demonstrate improved health and make you eligible for lower premiums. This may work for people who have quit smoking or have recovered from a past health issue.3
You may be able to find a new life insurance policy with better rates. Shop around and compare quotes to see if you can get coverage with a lower premium.
If you’ve canceled your life insurance policy and are ready to consider new options, Aflac offers term and whole life insurance plans that can help protect your loved ones. These policies come with premium rates that fit most budgets, guaranteed-issue options that let you bypass medical questions, and portable coverage that you can take to your next job. Start chatting with an agent and get a quote today.
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1 Nerdwallet – How to Get Out of a Life Insurance Policy. Updated May 25, 2017. https://www.nerdwallet.com/article/insurance/cancel-life-insurance. Accessed April 19, 2023.
2 Bankrate - How to cancel a life insurance policy. Updated September 6, 2022. https://www.bankrate.com/insurance/life-insurance/cancel-life-insurance/. Accessed April 19, 2023.
3 Policygenius – How to cancel your life insurance policy. Updated March 3, 2023. https://www.policygenius.com/life-insurance/how-to-cancel-your-life-insurance-policy/. Accessed April 19, 2023.
Coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.
In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400. In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400.
Aflac Final Expense insurance coverage is underwritten by Tier One Insurance Company, a subsidiary of Aflac Incorporated and is administered by Aetna Life Insurance Company.
The life insurance policy described herein contains an optional Accelerated Death Benefits Rider that is intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code. Aflac does not give legal or tax advice. Please consult with a qualified legal, tax, and accounting advisor before engaging in any transaction. In AR, AZ, ID, OK, OR, PA, TX and VA: Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions. For complete details, including availability and costs, please contact your local Aflac agent.
Content within this article is for informational purposes only and does not constitute legal, tax, accounting or medical advice regarding any specific situation.
Aflac cannot anticipate all the facts that a particular employer will have to consider in their benefits decision-making process. This article contains a general overview and is not intended to portray any specific benefits or details of Aflac policies.
Aflac does not offer Universal or Variable Universal life insurance.
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