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If you have life insurance you no longer need because you’ve created a better plan or saved enough money to cover what you need, you might wonder how you’ll cancel your life insurance.

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The good news is that there’s always a way out of life insurance. But, it’s not as easy as it sounds. It depends on the policy type, age, and specific policy requirements.

Here’s what you must know.

Canceling Term Life Insurance

The solution is simple if you still have term life insurance and no longer need it.

Just cancel it and stop paying.

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There’s not much to worry about or figure out with term life insurance. Once you stop making your premiums, the policy ends. Since it’s not a permanent policy with an investment value, there’s nothing to worry about regarding cashing out your earnings.

Surrender a Permanent Policy

If you have a permanent life insurance policy, such as a whole life policy, and you’ve had it for a while, it likely has a significant cash value. If you just got it a few years ago, there might not be much to worry about, and you can just cancel the policy.

You’ll want those earnings if you’ve invested in them throughout your lifetime. Rather than just stop paying your premiums, write the insurance company a letter letting them know you want to surrender your policy.

surrendering position

The insurance company will then cancel your policy, giving you the percentage of your earnings outlined in your agreement when you took out the policy. The insurance company will keep a portion of the revenues to cover its administrative costs.

Sell your Policy

You may be able to sell your policy to a third party. It’s called a life settlement and only works for seniors in their upper years with a death benefit of at least $100,000.

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When you sell your policy, you sell it to a bank or insurance company that becomes the beneficiary. The policy remains intact, and when you die, the bank or insurance company collects the death benefit instead of the beneficiaries you named on the policy.

It’s worth comparing the offer for a life settlement with the surrender value of your property. Most people make more money from a life settlement, but never assume – always check the difference and see which makes the most sense.

If you take a life settlement, the buyer of the policy has a vested interest in you and will check in with you and/or your loved ones to see your status to determine if/when they’ll receive payment.

Things to Know about Canceling Life Insurance

Before you cancel your life insurance, consider the following:

  • You will not receive any premiums back that you paid to this point. All premiums are the property of the insurance company.
  • You can’t reinstate your policy once you cancel it. If you need insurance again, you’ll have to reapply for it and pay premiums based on your age and health at the time.
  • You probably won’t owe taxes on the surrender value of a permanent life policy since the money you receive is a return of your principal invested, so you already paid taxes.
  • If you aren’t sure about canceling, you can borrow against your permanent life insurance. You must pay the amount back if you keep the policy, but if you don’t, your death benefit will be reduced by the amount you borrowed.

Final Thoughts

If you no longer need life insurance, you can cancel it, but ensure you’re 100% you no longer need it. Canceling means it’s gone – you can’t change your mind, and any future premiums will likely be higher.

Talk to your loved ones about your decision and get advice about the options you have to make sure you have the financial ability to provide your loved ones with money to cover your final expenses without issue.


Meet Aaron H., a senior life insurance agent from California with 15+ years of experience. With a major in finance, excellent analytical and communication skills, and a passion for helping clients find personalized solutions, Aaron is a trusted advisor in the industry. He stays up-to-date on the latest trends and developments by attending webinars and workshops, reading industry blogs, and writing informative blog posts on this website. Aaron also has a keen understanding of SEO and online marketing, which he uses to help his clients reach a wider audience and get the coverage they need. He cherishes spending quality time with his wife, two children, and elder parents.