Cancelling life insurance: Everything you need to know

As valuable as life insurance is, sometimes circumstances change, and you may need to amend or even cancel your plan. Before doing so, we’d recommend chatting to your adviser/broker/insurer first to see if there are any alternatives available to you.

Before you take any action, it's essential to understand the implications of cancelling your policy. In this article, we’ll cover everything you need to know before deciding, including the factors to consider, the consequences of cancelling, and how to cancel your policy. 

So, if you're thinking about cancelling your life insurance, keep reading to make an informed decision.

In short:

• You'll receive a refund provided you cancel within the 30-day cooling-off period.
   

• You won't receive a refund if you cancel after the 30-day cooling-off period.

Can I cancel my life insurance policy?

You can cancel life insurance at any time, but there are some things to consider before doing so. 

Remember, cancelling your life insurance policy means that your cover will end. If you no longer need cover, cancelling the policy may be the best option for you. But it is always worth speaking to your adviser/broker/insurer first to ensure you have thought of all scenarios.

Reasons to cancel your life insurance policy

Before we discuss how to cancel your life insurance policy, let’s first consider why you would want to do this.

Most of us purchase life insurance simply because we believe that it is important to protect our loved ones in case something happens to us – either through illness, accident or old age.

We may also buy life insurance to ensure that our children and grandchildren receive a financial inheritance after we die.

However, there are some specific situations where you may want to consider cancelling your policy, such as:

• You no longer need cover - your circumstances may have changed from when you first took out the policy. For example, you may have bought a policy to cover a mortgage which you've now paid off.
   

• You found a better deal - While you may have found a good deal with your current provider, this doesn't mean you have to stay with them. Another provider may offer a better policy with cheaper premiums, in which case you can switch providers.
   

• Your job changes - If you're changing jobs, you may want to cancel your existing policy and replace it with a different provider. After all, your employer may offer better benefits or lower rates.
   

• You get married or divorced - If you've recently gotten married or divorced, you may want to change some aspects of your current policy, or cancel it entirely.
   

• You have children - If you have kids, you may want to make sure that your family is taken care of in case the worst happens. This may lead to you reviewing your cover with us, and potentially looking into family life insurance.

• You can no longer afford cover - Everyone's financial situation is different, this might mean you can no longer afford to pay premiums each month for cover. For more information, please see - What to do if you can’t afford your life insurance.

If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have options available that allow you to keep the cover in place.

How do I cancel my life insurance policy?

If you decide to cancel your policy, then you'll need to take certain steps to do so. This includes contacting your insurer and informing them of your decision. Cancelling your policy is usually a simple process, and can require a phone call to your insurer.

You'll also need to provide basic details, such as your policy number, proof of identity and address. Your insurer can then cancel any direct debits made towards your monthly premiums.

Before you cancel your policy though, you may need to consider whether you want to replace your plan with a new one. If you will be looking into new cover, it is generally better to do this before cancelling an existing plan, just in case there are complications or delays to getting a new plan in place.

If I cancel my policy, do I get my money back?

It's usually possible to cancel a life insurance policy, 30 days from taking out cover, and to receive a refund for any premiums you have paid so far. This is called the ‘cooling off period’ Outside of this window, you are still able to cancel the policy, but you will not receive a refund for your payments so far.

Once this cooling-off period has passed, unfortunately no refunds will be made if you decide to cancel your policy.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

Remember: If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have a scheme that allows you to keep the cover.

Can my insurer choose to cancel my policy?

In some cases, your insurer can cancel your policy. If you don't keep up with your monthly payments, your insurer may decide to stop covering you altogether. However, if this does happen, they won't just cancel your policy straight away - they'll give you notice.

In many cases, your insurer will ask you to pay off any outstanding debts, such as unpaid premiums, before cancelling your policy. If you're behind with making repayments, your insurer may choose to cancel your policy without giving you a chance to catch up.

If you are experiencing financial difficulties, and are at risk of missing premium payments, please get in touch with your insurer as they may have options available to you.

They may also cancel your policy if you've broken the terms and conditions of your policy. For example, you may have withheld information - like a medical condition - during the application process.

Why you shouldn't cancel your policy

It might be tempting to cancel your policy if you feel it's no longer needed. However, it can be beneficial to keep it in place for emergencies or unexpected life events. Here are a few reasons to keep your policy:

• Makes a difference in times of need: If you keep your policy, your family could benefit from the payout in case of death. This money can help ease any financial burden that may arise during this difficult time.
   

• It can help your family or loved ones: Policies play a huge role when it comes to taking care of a family and/or loved ones. The money received can be used to pay for funeral expenses, debts, and other financial commitments.
   

• You leave your family at risk: If you cancel your policy and something unexpected happens, you can leave your family and/or loved ones vulnerable. This could be extremely difficult for them to handle.
   

• A new policy may be more expensive: The cost of life insurance tends to rise as you get older. If you cancel your current policy and take out a new one at a later date, it could be more expensive.

Buying a new policy

If you decide to purchase a new policy, you need to decide between purchasing term or whole life insurance.

Term insurance provides temporary coverage for a limited period of time.

Learn more about term life insurance.

Whole life insurance offers long-term coverage and lasts right up until you die.

Learn more about whole life insurance.

Both types of policies offer certain advantages and disadvantages. For instance, term insurance is cheaper than whole life insurance. But it doesn’t cover you for the long haul, thus you aren’t guaranteed a payout when you die.

In addition, you need to consider your personal situation when choosing which policy to go for. For instance, you need to decide if you want to insure your family members too.

It is also worth noting that a new policy will require new underwriting at the time of application. This means that you will be disclosing information about your current health and lifestyle.

Learn more about underwriting.

Where to get advice

Making the decision to cancel your life insurance policy is a big one and it’s important to make sure you have all the facts before taking any action. It's best to speak with a knowledgeable adviser who can help you understand your options and make an informed choice.

Cavendish Online is dedicated to helping you make the best decisions for your long-term financial well-being. Contact us today, and our team of advisers can help you understand and assess whether cancelling is the right decision for you.