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How to Cancel a Life Insurance Policy

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.

Can you cancel a life insurance policy?

You can cancel a life insurance policy by:

  • Let the policy lapse: No matter what life insurance policy you have, you can simply stop paying premiums at any point. The policy will lapse, and you’ll lose coverage. Keep in mind that you typically can’t recover any of the premiums you paid once the policy lapses.
  • Surrender the policy: When you surrender a permanent life insurance policy (such as whole life insurance), you may be able to get the policy’s cash value minus surrender fees. The amount of money you’ll receive may depend on how long you’ve had the policy, since the cash value component builds over time.
  • Get a tax-free exchange: If you believe your current life insurance policy isn't right for you anymore, you can consider trading it for a different policy or annuity. Your current premiums will roll over into the new policy, and you’ll never lose life insurance coverage.1
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Why cancel my life insurance policy?

While canceling a life insurance policy may sometimes result in a net loss, there are some occasions when it may be the right option:

You don’t need life insurance coverage anymore

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 life insurance policy’s death benefit is not worth the amount you’ll save on premiums.

You can’t afford to pay 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.

You’ve paid off your debts

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.

You want to change your investment strategy

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

How to cancel your term life insurance policy

If you’re thinking of canceling your term life insurance policy, here are the steps you can take:

  • Start by evaluating your reasons for cancelation and considering how important life insurance coverage is to you.
  • 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.

How to cancel your whole life insurance policy

Here’s how you can cancel a whole life insurance policy:

  • Consider how long you've had the life insurance policy and find out the cash value it has accumulated, as well as what the surrender fees may be.
  • If you have a newer policy with little to no cash value, inform your life insurance company.
  • 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.
  • Fill out any surrender forms and provide supporting documentation if necessary.
  • Once you submit the forms and your life insurance 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:

  • Surrender or cancelation fees: Newer whole life insurance policies may have high surrender fees that can eat into a big portion of the cash surrender value you’d receive. You may have to do a cost-benefit analysis to determine if the fees are worth it.
  • Your beneficiaries: Carefully consider all your beneficiaries before terminating a life insurance policy. Your children may have grown up, but your spouse may still depend on your income or pension.3
  • Your overall estate plan: Consider your estate plan and whether your life insurance policy can be repurposed. For example, instead of leaving a cash lump sum to a charity in your will, you can name the charity as your beneficiary, so they receive the payout when you pass.
  • Selling your policy: You may be able to recover some of your premiums by selling your life insurance policy. Consider getting in touch with a reputable broker who can find you a buyer and guide you through the process.

Alternatives to canceling 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:

Reduce your life insurance coverage

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

Withdraw or borrow from your cash value

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.

Ask for a new medical exam

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

Get a new life insurance policy

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.

Explore your life insurance options

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.

Still have questions?

Explore your life insurance options.

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