Having life insurance means your loved ones are protected from financial worry should the worst happen to you. There are a few different types of life insurance to choose from – some more affordable than others – but if you've got life insurance and your circumstances change, or you change your mind about the kind of cover you need, can you cancel your life insurance policy? The answer is: yes. Here’s everything you need to know about cancelling or changing your policy.
Can I cancel my new life insurance policy?
If you’ve just taken out life insurance and you change your mind – don't worry. Your new life insurance policy should come with a 30-day cooling off period, so if you decide it’s not for you during this window, you can cancel it and be refunded your first premium.
Can I cancel my existing life insurance policy?
You can always cancel your life insurance policy, however long you've had it. You just need to bear in mind that you won't be refunded for the premiums that you've paid so far, and after you've cancelled your policy, you'll no longer be insured. You should consider the impact of this carefully before cancelling.
Things to consider before cancelling your life insurance
There are upsides and downsides to cancelling your life insurance policy – and various reasons why you might be considering it. It's important to be sure cancelling is the right thing to do before doing so; there might be other, more favourable options at our disposal, like updating your cover or taking out an additional policy.
Your financial dependents
Most people take out life insurance to protect those who would be financially affected by their death – like a partner or children. If these people are no longer financially dependent on you, you might decide to cancel your life insurance policy. This could happen if after a separation, for example, or as your children become financially independent. You will be able to do this, but remember you won’t get any money back, no matter how long you’ve been paying the premiums. If you're near the end of your policy, you might decide it's worth keeping the cover in place.
Your monthly insurance premiums
You might consider cancelling your life insurance policy if you're trying to reduce your monthly outgoings. Again, this is fine, but you should try to avoid cancelling if you still have a need for protection – i.e. if there are people in your life who'd be left struggling financially if you died. It’s also important to remember that life insurance policies are based on risk, so the younger you are, the cheaper they are. If you cancel your policy now and decide to take out a new one in the future, the premiums on the new policy could be more expensive than your current one.
Changing your cover level
You might think about cancelling your policy and taking out a new one if your circumstances change and the cover you have is no longer sufficient – but changing the cover level of your existing policy is likely to be a better option in this scenario. Many insurers will allow you to tweak this after certain life events, like getting married, becoming a parent, or taking out a new mortgage. This could work out cheaper than cancelling and taking out a new policy because you won't have to go through medical underwriting again – and generally speaking, life insurance is more expensive the older you are, so a new policy is likely to be more expensive than your existing policy.
Taking out an additional policy
Another alternative to cancelling and taking out a new policy, if you realise you need more cover than you already have, is to keep your existing policy and take out an additional one on top. In this scenario, you'd need to work out the price difference between the two. Depending how long ago you took out the first policy and how much more cover you need in place, it could be cheaper to take out an additional policy OR to cancel and take out a new one. Your age, health and lifestyle will play a part in this.
And regardless of price, some people might prefer to have their needs covered with one policy, just because it makes things simpler to manage. In which case, cancelling your existing policy and taking out a new one is always an option – you just need to be aware of the potential cost implications.
Speaking to an adviser
If you're thinking of cancelling your policy because you no longer need cover or, conversely, because you need more cover, it's always best to talk your options through with an expert. They'll be able to talk you through the pros and cons of cancelling, reviewing or taking out a new a policy in your particular set of circumstances. This way you can be sure you're doing the right thing.
- You can cancel your life insurance policy at any time
- If you cancel within the 30-day cooling off period, you'll be refunded your first premium
- If you cancel at any other time, you won't be refunded any of the money you've paid in premiums, no matter how long you've been paying them
- You might decide to cancel your life insurance because you no longer need cover or you can't afford the monthly premiums – but bear in mind it's likely to be more expensive to take out cover in the future because the price of life insurance goes up with age
- You might decide to cancel your life insurance because you need more cover – but it might be a better option to amend your existing policy or to take out an additional policy
- Speaking to an adviser is always best when making changes to the protection you have in place
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This post is intended for informative purposes only and does not constitute advice.