Whether you’re married, a single parent with children, or have a family that relies on your income, life insurance offers valuable cover and protection for you and your loved ones throughout your lifetime.
However, regardless of how long you’ve had life insurance, a change in personal circumstances can leave you with a decision on whether to keep a policy or cancel it.
People think about cancelling life insurance for many reasons, but is it always the best approach?
In this guide, we explore some of the reasons you might want to cancel your life insurance, whether it’s best to cancel or keep your policy, and how to do so if cancelling is the right option for you.
Whatever the reason for considering cancelling a life insurance policy, it’s not a decision that should be taken lightly, as it does come with some consequences that you need to consider.
For many, the fact they no longer have to pay for their insurance will be a bonus.
Still, it’s also worth considering that you will no longer have that safety net of financially protecting your family if you should pass away.
Let’s look at the groups of people who have life insurance and work through whether they should stick or twist.
Me, I shouldn’t cancel my life insurance:
I’m in my mid-40s (when I originally wrote this piece, I was in my mid-30s 😲but the advice is still relevant), have a mortgage, a thirteen-year-old daughter and ten-year-old twin boys ( (so 4 mortgages in total).
My need for life insurance is massive, so I am properly tooled up with
Before cancelling life insurance, you should assess whether your family could pay the bills if they lost your income due to your unexpected demise.
If they would struggle, then speaking to your insurer about alternative options, such as reducing the amount you pay each month, could be better than cancelling your life insurance completely.
My lovely client Sarah shouldn’t cancel her life insurance.
She’s a single mum who purchased € 500,000 in life cover for her daughter seven years ago.
The premium is only €21 per month because she was in her twenties when she took the policy.
She was shocked; it was so cheap.
Note to anyone in their 20s reading this post: Put loads of cover in place now when you’re young. You won’t regret it.
Sarah’s cover would cost her €78 if she were to cancel it only to change her mind.
That’s a different story. Ask yourself:
If you had passed away yesterday, are there sufficient funds for your spouse or your children to cope financially?
If yes, you can probably cancel life insurance and save yourself the monthly premiums.
I’m sure you can think of more fun ways to spend your hard-earned!
But before you cancel life insurance, you should review it.
Maybe there’s a more suitable type of life insurance out there for you, like:
Whole of life insurance with cashback
Whole of life insurance that pays for itself
Section 72 life insurance that pays inheritance tax
If you have reviewable whole life insurance, you should STRONGLY consider switching to fixed-price whole life cover.
You don’t want to leave any debts behind for your family to deal with when you shuffle off.
Life insurance will clear those debts on your death.
It’s the sound thing to do.
In conclusion, you need life insurance if anybody depends on your paycheque or if you owe money.
Do I need life insurance after my home has been paid off?
Some people cancel their life insurance policy once they have paid off their mortgage, as they no longer worry about payments on their house being covered if they pass away.
Before you do, please read this blog:
What Happens Mortgage Protection When You Pay Off Your Mortgage?
If you retire in a comfortable financial position and don’t have issues with inheritance tax, paying bills, or daily living expenses, you may feel that you no longer need life insurance.
However, suppose you retire with debt or have a family that is financially dependent on you.
Continuing your life insurance policy during your retirement may be a good idea to retain that peace of mind.
Cancelling your policy and taking out a new one with more coverage is an option; however, many policies allow you to increase your coverage within certain limits without providing any further medical information.
It’s also worth noting that if you do cancel your policy and later find you need cover again, your health could have changed and you’ll be older so it’s likely to cost more.
You may even find you cannot obtain further cover due to a new health issue, so if you’re thinking about cancelling to take out a new policy make sure the new policy is in place before cancelling the old one.
You have two options to cancel your life insurance.
a) Cancel your direct debit, and your policy will lapse automatically after three months of non-payment. This option gives you three months to change your mind, pay the arrears, and reactivate your policy at the original premium 👌
b) Send a signed letter to your insurer instructing them to cancel your policy.
But remember, once you send this letter, there is no turning back. Once you cancel it, you can’t reinstate it if you change your mind.
Also, if your policy is assigned to a bank, the insurer will require a “letter of no further interest” from your bank before they can cancel it.
Think carefully.
Standard term life insurance plans only payout after the policyholder passes away (there is a policy that offers cashback)
That means that if you cancel your policy, you won’t receive a payout regardless of how long you’ve been paying into it.
If you cancel within 30 days of your plan starting, the insurer will refund any premiums paid.
If you choose to cancel your plan at another time outside the mandatory 30-day cooling-off period, you generally won’t receive any refunds.
Before you hit the “cancel life insurance” button, run it by me first.
There may be some options you haven’t considered.
Once you cancel, there’s no going back, so please be sure it’s the right thing to do.
If you’re about to cancel life insurance because you can no longer afford it but have financial dependents or a mortgage, contact me before doing something you’ll regret.
Complete this financial questionnaire, and I’ll be able to advise you.
Chat soon
Nick.
Editors’ Note: We first published this blog in 2014 and have regularly updated it since
As Ireland's leading life insurance broker, we specialise in comparing the rates and policies from the top five Irish life insurance providers and offering the very best value quotes to suit the individual needs of our clients. Our expertise lies in finding a suitable insurance plan for those with specific needs, be it a particular illness, occupation or claim history, we've got you covered in every sense!
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