Before Cancelling Your Whole Life Insurance, Consider This (2022)

November 8, 2022

85 4 minutes read

When to Drop Full Coverage on a Car – QuoteWizard

Deciding to cancel your whole life insurance policy can be a tough choice. You may have been faithfully paying premiums for years, and it might seem like a waste to let it go. However, before you make a final decision, there are several important factors you should take into account. In this guide, we’ll explore how to cancel a whole life insurance policy and weigh the pros and cons. Additionally, we’ll discuss alternatives to cancellation, such as selling or keeping the policy. So, if you’re contemplating canceling your whole life insurance policy, keep reading to learn more!

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Key Points to Consider Before Cancelling Your Whole Life Insurance Policy

Timeframe of Premium Payments

One crucial factor to consider is the duration of your premium payments. If you’ve only been paying for a few years, canceling your policy may not yield a significant cash value. Conversely, if you’ve been diligently making payments for 20 years or more, you’ve likely accumulated a substantial cash value that you would forfeit by canceling the policy.

Reading: What happens if you cancel whole life insurance

Outstanding Policy Loans

Another important consideration is any outstanding loans against your policy. Cancelling your policy will cause these loans to become immediately due. Therefore, you must be financially prepared to pay off the loan entirely before canceling your policy, or else you may find yourself in debt.

Impact on Beneficiaries

Lastly, think about the beneficiaries of your policy. If you’ve designated someone as a beneficiary, they will receive the policy’s death benefit upon your passing. However, if you cancel the policy, they will lose this benefit. This is particularly crucial if you have family or loved ones who rely on the death benefit provided by your policy.

Canceling Your Whole Life Insurance Policy

Now that you’ve considered the critical factors before canceling your whole life insurance policy, let’s delve into the steps involved in cancellation. If you determine that canceling the policy is the right decision for you, there are specific actions you need to take.

Contact your insurance company and inform them of your intent to cancel.
Provide a written notice of cancellation, and in some cases, you may be required to submit a copy of your death certificate.
Once the insurance company receives your cancellation notice, they will process it and issue a check for the cash value of your policy.

It’s important to note that when canceling your policy, you will not receive the full amount of your premiums. The insurance company typically retains a portion of the premiums as a cancellation fee, which is usually equivalent to about a year’s worth of premiums. So, if you’ve been paying $100 per month for your policy, anticipate receiving a check of approximately $900 upon cancellation.

After receiving the check from the insurance company, you must pay off any outstanding loans against your policy. Remember, if you don’t settle the loan in full, it will become immediately due, potentially leaving you in debt.

Once you’ve completed these steps, your policy will be officially canceled, and you will no longer be responsible for premium payments. Keep in mind that if you have named a beneficiary on your policy, they will still receive the death benefit in the event of your passing. So, if you have loved ones who depend on your policy’s death benefit, this is an important factor to consider.

Selling Your Whole Life Insurance Policy as an Alternative

In some cases, selling your whole life insurance policy may be a more viable option than canceling it. There are several reasons why you might choose to sell instead of cancel.

Firstly, if your policy has a substantial cash value, selling it can potentially yield more money than canceling and receiving the cash value.

Secondly, if your policy has a relatively low death benefit, you may find a buyer willing to pay more than the benefit is worth. This can be particularly advantageous if you have beneficiaries who rely on your policy’s death benefit.

Lastly, selling your policy may provide more flexibility compared to canceling it. For instance, if you sell your policy to a life settlement company, they may allow you to continue living in your home or even use your policy as collateral for a loan.

Steps for Selling Your Whole Life Insurance Policy

If you’re considering selling your whole life insurance policy, there are several factors to keep in mind:

Find a buyer for your policy. You can approach a life settlement company or work with a specialized broker, such as Annuity Expert, who focuses on selling life insurance policies.
Assess the value of your policy to ensure you receive a fair price. Consult a life settlement company or broker experienced in appraising life insurance policies.
Evaluate the terms of the sale and decide whether you prefer a lump sum payment or payments over time. Additionally, consider whether you want to continue residing in your home or utilize your life insurance policy as collateral for a loan.

The decision to cancel or sell your whole life insurance policy is a personal one, and there is no definitive right or wrong answer. It’s essential to evaluate your unique circumstances before making a final choice.

Next Steps

Canceling your whole life insurance policy can be a challenging decision. There are numerous factors to consider carefully. We hope this article has provided valuable insight into what you should ponder before canceling your policy. If you have any further questions, feel free to reach out to us. We are here to assist you. Thanks for reading!