Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Your coverage ends.
When you're cancelling a term life insurance policy, that's the end of it. They do not have any cash value. A carrier may return a pro-rated portion of the last premium payment if you canceled it before it lapses, but that will vary by carrier. Most people will just not pay the premium and allow the policy to lapse on its own.
If you're terminating a permanent policy (universal or whole life), there will generally be cash value in the policy to be collected - the cash value is subject to surrender charges if they have not been zeroed out yet (this depends upon the structure of the policy and how long it's been in force).
When you cancel your Life Insurance policy, you are not only giving up the coverage you purchased but you may also be giving up your insurability and cost of insurance.
When you applied for the coverage you are considering cancelling, you went through underwriting to determine if you are "insurable". While you are insured, if your health was to deteriorate, the insurance company still maintains the coverage you have. If after cancelling your policy, your health starts to suffer, then when you try to reapply for another Life Insurance policy, you may not be insurable and at best you will have to pay more in premium.
Plus consider you will be older which also increases your premium. I recommend that you talk to your broker/agent first to discuss your situation and see the alternatives you have.
Many people wonder if they will have to pay a penalty if they cancel their life insurance. As Matt explained, the "penalty" is that you will probably have to pay more to purchase a new policy in the future. This may be due to incurring a health condition or it will be due to being older when you reapply.
However, there is no fee charged for cancelling life insurance. With a term policy, you simply quit paying premiums or call the company to cancel it. They may even refund you a prorated premium that you have paid and not used.
With permanent insurance, there is a surrender period during which you will collect no cash value that has been built up. After this surrender period, you will collect the surrender value of the policy when you cancel it, minus any loans or unpaid premiums.
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When you're cancelling a term life insurance policy, that's the end of it. They do not have any cash value. A carrier may return a pro-rated portion of the last premium payment if you canceled it before it lapses, but that will vary by carrier. Most people will just not pay the premium and allow the policy to lapse on its own.
If you're terminating a permanent policy (universal or whole life), there will generally be cash value in the policy to be collected - the cash value is subject to surrender charges if they have not been zeroed out yet (this depends upon the structure of the policy and how long it's been in force).
When you applied for the coverage you are considering cancelling, you went through underwriting to determine if you are "insurable". While you are insured, if your health was to deteriorate, the insurance company still maintains the coverage you have. If after cancelling your policy, your health starts to suffer, then when you try to reapply for another Life Insurance policy, you may not be insurable and at best you will have to pay more in premium.
Plus consider you will be older which also increases your premium. I recommend that you talk to your broker/agent first to discuss your situation and see the alternatives you have.
However, there is no fee charged for cancelling life insurance. With a term policy, you simply quit paying premiums or call the company to cancel it. They may even refund you a prorated premium that you have paid and not used.
With permanent insurance, there is a surrender period during which you will collect no cash value that has been built up. After this surrender period, you will collect the surrender value of the policy when you cancel it, minus any loans or unpaid premiums.