How To Cancel Life Insurance

Steps you can take to cancel and when to consider it

Businesswoman at a cafe

Luis Alvarez / Getty Images

Life insurance is an excellent way to protect your loved ones financially if you die, but it’s not always necessary, and some policies aren’t the right fit.

Whether it’s a matter of budget, need, or something else entirely, the process of canceling your policy can vary based on whether you have term or permanent insurance and how long you’ve had it. Depending on the situation, here’s what you need to know about canceling life insurance the right way.

Take Advantage of Free Look Periods

When you first purchase a life insurance policy, you’ll typically get what’s called a "free look" period. Depending on the insurer and the state you reside in, you can get 10 to 30 days to change your mind and get your money back.

During the free look period, research the life insurance company, review the fine print of your policy, and double-check to make sure you can’t find a better deal somewhere else.

If you decide to cancel your policy within the allotted time, contact your agent if you have one or the insurance company directly. Make sure you get the dates right, because if you cancel after the period ends, you’ll lose the initial premium you paid.

Canceling Term Life Insurance

Term insurance is the most straightforward form of life insurance, and canceling it is as easy as cutting off your monthly payments. You may be able to do this by logging into your online account and removing the payment information or, if you make payments in person or by mail, skipping your next one.

Life insurance policies usually have a grace period of 31 days after your payment is due, so if you change your mind and want to keep the policy, you can maintain it by getting caught up on payments. You’ll also continue to have coverage during that time.

But if you’re serious about canceling, the coverage will drop as soon as the grace period is over.

Alternatively, you can reach out to your insurance agent or company via mail or phone to file your cancellation request—although the agent may ask you to send a written request. If you go this route, you won’t get to take advantage of having coverage during the payment grace period.

If it’s a matter of budget, see if your insurer will allow you to reduce your coverage instead of dropping it altogether. Companies that allow this may only let you do it a certain number of times, or to a certain minimum amount of coverage, such as $100,000.

If you want to maintain coverage, just not with your current policy, have another policy in place before your existing one is no longer valid.


If you cancel a life insurance policy and later want another one, you’ll need to reapply and will likely pay more in premium (rate is based, in part, on age), or you may even be uninsurable (if you have or develop a serious health condition).

Canceling Permanent Life Insurance

The process for canceling a permanent life insurance policy is more complicated. The process generally differs between whole life and universal life insurance (UL); each has a cash value account but handles premiums differently. Simply stopping payments may not be enough to cancel the policy and in fact, could lead to a loss of the entire cash value you’ve built up in it.

Whole life policies, in most cases, require regular premium payments to remain in force. On the other hand, you can pause or suspend premium payments to a universal life policy and still keep it active.

Automatic Payment Provisions

Universal life policies will deduct your premium payments from the cash value account if you don’t pay; they’re designed to do this. Some whole life policies have an automatic premium loan (APL) provision, which essentially will do the same thing.

Suspending payments might be preferable to surrendering the entire policy if you’re facing a financial setback but still have an insurance need. On the other hand, if you suspend payments for too long on a UL policy (or on a whole life policy with an APL provision), you could exhaust the cash value (and the policy could lapse).

Before canceling your permanent life policy, know whether you have whole life or universal life so you understand the impact of skipping premiums. Also, be aware whether you have an APL provision (on a whole life policy) that would kick in if you miss one or more payments.


If you’re thinking of just withholding payments as you might to cancel a term policy, don’t. Check with your insurer to see what specific steps you need to take to receive the surrender value of the policy.

Surrender Value

When you surrender, or cash out a permanent policy, you will receive the surrender value, which is the cash value less any surrender charges or penalties, if they apply.

Surrender charges last for a specific number of years, the “surrender period,” and are outlined in your policy documents. They may be based  on a percentage that gets smaller annually, and calculated according to factors such as your age and the amount of coverage you have. In other words, the higher your coverage amount or the older you are, the more expensive surrender charges are likely to be.


The surrender period can last up to 20 years, with charges decreasing each year until the end of the period when they reach zero.

During the first few years of the policy, these charges can be particularly steep. For example, a policy with a 10-year surrender period may be worth 0% of the cash value during the first two years, but be worth 95% of the cash value in year 9. In this case, if you cancel your policy in those first two years, you’d lose everything you put into it.

Check with your insurer for the exact surrender value of your policy and to find out what steps you need to take to cash it out. You’ll typically be required to fill out and submit a surrender form.

If your policy is still in a surrender period, you may want to look for alternatives to canceling until it’s “out of surrender.”

Life Settlements

You may be able to sell your policy to a third party via a life or viatical settlement. The payout is less than the policy’s death benefit, but may be more than the cash value. If you’re terminally ill, you won’t have to pay taxes on the amount (if you’re not, you likely will). When you die, the third party receives the death benefit.


When you receive the surrender value of a permanent policy or sell it, the portion of the balance that exceeds what you paid into the policy is considered taxable income in most cases.

Alternatives To Canceling Your Policy

In some situations, it may make sense to do something else with your policy instead of surrendering it.

  • Request the reduced paid-up option: If you don’t want to pay premiums but still need some coverage, you may be able to use the cash value to essentially purchase a lower death benefit amount with no future payments required. The coverage amount with this option will depend on your cash value balance.
  • Pause payments: If you have a universal life insurance policy with a cash value, pausing premium payments will not cancel the policy. If you simply can’t afford payments but would prefer to maintain coverage, your policy could last years without you contributing. But it’s imperative that you contact your insurer to better understand the potential benefits and downsides to this option based on your specific policy.
  • Take a policy loan: Again, if you prefer to keep the policy in force but need funds now, you may be able to access the cash value without being assessed a surrender penalty, via a policy loan. This is one way to also avoid potential taxation issues that can result from making a direct withdrawal.
  • Withdraw funds: If you have a substantial enough cash value and your policy is considered out of surrender, you can withdraw directly from the account. If you take out less than what you paid in premiums, you shouldn’t have to pay taxes on the withdrawal.
  • Exchange the policy: A 1035 exchange allows you to exchange your policy for a new life policy, an annuity, or even for long-term care insurance, without requiring you pay taxes on the gains you earned in the cash value account.


If you’re considering exchanging for a new life insurance policy, make sure you know how long the surrender period is on the new policy, what the surrender charges are, and if you’re able to withdraw any amount from the cash value without incurring surrender charges during the surrender period.

Do You Get Your Money Back When You Cancel Your Life Insurance?

When you cancel a term life insurance policy, you won’t get any of your money back in most cases. The only exception is if you get rid of the policy during the free look period.

Note that some life insurance companies offer a return of premium rider, which might sound like you can get your money back. But these riders only pay out if you keep the policy for the duration of its term and don’t die before it ends.

With permanent insurance, you can receive some or all of the money you paid plus the interest that the cash value has earned.


You can lose money on a permanent life insurance policy that’s subject to surrender charges and taxation.

When Does It Make Sense To Cancel Your Life Insurance?

Regardless of your reasons, canceling a life insurance policy could leave your loved ones unprotected financially. But here are some situations where it might make sense:

  • You no longer need the coverage
  • You’re exchanging for an annuity or long-term care policy
  • Your budget is tight
  • You found a better deal with another insurer and have already been approved for coverage
  • You need to access the death benefit via a life or viatical settlement

Remember that in some cases, you may be better off reducing your coverage or suspending premium payments rather than canceling it altogether. Whatever you do, avoid canceling without talking to your insurance company about your policy specifics and carefully considering the benefits, drawbacks, and potential alternatives.

Was this page helpful?
Related Articles