The best time to cancel your term life insurance is when the need for coverage ends, the term expires, or when the policy resets the premium rates.
Life insurance is an important tool to provide security for your family. You can confidently cancel your policy when you have enough assets to provide for your family if you were to die. Most people never reach the point where they have enough assets to provide for their family without life insurance.
When a policy reaches the end of its term you may be able to continue the policy, but at a much higher rate. If you are able to find an alternative policy at a lower rate, it may make sense to cancel then.
Term life insurance should be cancelled when the term expires because most carriers will increase the premiums about ten fold. Another time when the financial need is fulfilled meaning all debt is repaid, kids grown and out on their own and the family wealth is built to the point a loved one left behind will not have to worry financially for the rest of their life. The last scenario would be to convert it to permanent life insurance.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
It depends on the status of the policy, your need, and other available options to you. Most people will cancel a term policy when the initial period of premium guarantee expires (your term length) or they have replaced it with a new policy.
Life insurance creates cash upon the death of the insured. Those that simply cancel their life insurance policy because they think they no longer have a need for coverage may not think about many of its other uses. Just because the big debts are paid off (e.g. mortgage, cars, etc.) doesn't mean the need for life insurance is over. Many people want to have coverage in place for estate planning purposes, income replacement (so your family can continue their current lifestyle and not have to make drastic changes due to personal finances), leaving a legacy to your loved ones, or paying burial expenses and unexpected medical bills surrounding the event of death (e.g. going to the hospital) that you just don't anticipate. When a period of guarantee expires on a term insurance policy, one of two things will happen: 1) the policy will change to annual renewable term insurance and the premiums will increase each year (based on age) or 2) the premiums will remain the same and the death benefit will decrease each year (generally seen on term UL policies - term insurance on a universal life chassis).
Another reason to continue having life insurance in place is to protect your insurability. For example, if you've got preferred plus rates and had a heart attack or cancer while your policy is active, you're not gonna be getting those preferred plus rates again, meaning if you wanted to get another life insurance policy in the future, you would be paying a whole lot more in premiums because would be looking at a higher risk class (the risk class determines the premiums - the higher the risk class/rating, the higher the premiums are going to be). Many people often look at converting all or a portion of the face amount to permanent insurance (if you're still within the available conversion period on your policy) in that scenario because there's no new medical underwriting and the rates are just recalculated based on your age and the type of program it's converted to (universal or whole life).
Before canceling any life insurance policy, you should always discuss it with your agent to make sure it's the right course of action for you so you don't miss something or realize there was a need where you thought there wasn't one. You don't want to look back and say I wish I still had that coverage.
Great question! The easy answer? When you have a better coverage, or have filled your need. For example - you took out the term policy to cover a child's college expenses. They finish a year early, and you no longer have that expense to worry about. Cancel it, and be thankful it served its purpose. Or you find a whole life policy that better fits your long term needs, and will provide cash and coverage regardless of future health issues. Hope that helps, if you have questions, please feel free to contact me. Thanks for asking!
President, Lane Independent Agency, Southern California
The easy answer is when you don't need it anymore. Let's be specific. Do you still have children who are dependent on you? A spouse who is? Where would they be without your financial assistance? Do you have enough funds in safe holdings to protect all of their needs/wants if you were no longer there? If you can truly answer yes to all of these, and are not worried about the safety of those stashed funds, then it may be the time. But remember, if you cancel and later decide you want more insurance, it will either cost more, or no longer be available due to health concerns. Choose wisely! Thank you. GARY LANE
Owner, Best Health And Car Insurance Rates - Instant Online Quotes, US
Based on my 33 years as a life insurance broker, there are multiple answers to your question. Since there are different types of policies (guarantee periods, conversion options etc...) different face amounts of coverage, and of course, no identical household financial situations, it's critical to speak with an experienced broker (and their website).
Other variables include how your needs have changed, changes in family makeup, budget concerns and possible health issues.
This is the type of issue we work with every day and to properly assess your situation, more information is needed. The ramifications of terminating a policy are substantial and the correct decision must be made.
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Life insurance is an important tool to provide security for your family. You can confidently cancel your policy when you have enough assets to provide for your family if you were to die. Most people never reach the point where they have enough assets to provide for their family without life insurance.
When a policy reaches the end of its term you may be able to continue the policy, but at a much higher rate. If you are able to find an alternative policy at a lower rate, it may make sense to cancel then.
Life insurance creates cash upon the death of the insured. Those that simply cancel their life insurance policy because they think they no longer have a need for coverage may not think about many of its other uses. Just because the big debts are paid off (e.g. mortgage, cars, etc.) doesn't mean the need for life insurance is over. Many people want to have coverage in place for estate planning purposes, income replacement (so your family can continue their current lifestyle and not have to make drastic changes due to personal finances), leaving a legacy to your loved ones, or paying burial expenses and unexpected medical bills surrounding the event of death (e.g. going to the hospital) that you just don't anticipate. When a period of guarantee expires on a term insurance policy, one of two things will happen: 1) the policy will change to annual renewable term insurance and the premiums will increase each year (based on age) or 2) the premiums will remain the same and the death benefit will decrease each year (generally seen on term UL policies - term insurance on a universal life chassis).
Another reason to continue having life insurance in place is to protect your insurability. For example, if you've got preferred plus rates and had a heart attack or cancer while your policy is active, you're not gonna be getting those preferred plus rates again, meaning if you wanted to get another life insurance policy in the future, you would be paying a whole lot more in premiums because would be looking at a higher risk class (the risk class determines the premiums - the higher the risk class/rating, the higher the premiums are going to be). Many people often look at converting all or a portion of the face amount to permanent insurance (if you're still within the available conversion period on your policy) in that scenario because there's no new medical underwriting and the rates are just recalculated based on your age and the type of program it's converted to (universal or whole life).
Before canceling any life insurance policy, you should always discuss it with your agent to make sure it's the right course of action for you so you don't miss something or realize there was a need where you thought there wasn't one. You don't want to look back and say I wish I still had that coverage.
Other variables include how your needs have changed, changes in family makeup, budget concerns and possible health issues.
This is the type of issue we work with every day and to properly assess your situation, more information is needed. The ramifications of terminating a policy are substantial and the correct decision must be made.