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If you’re thinking about cancelling your life insurance policy, take a breath before you do.
You may want to cancel your life insurance for many reasons. For example, because you feel young, healthy, and death feels a long way off. You may even have started a new job and have life cover as part of a package of benefits. Or perhaps you've recently retired and are wondering if you should change your insurance. For other people, the motivation to cancel may be that they just can't afford their life insurance payments. They may be struggling financially and decide that the payments are an additional cost that can be cut to free up more room in the family budget.
What to consider before cancelling your life insurance policy
There may be a few important reasons for you to continue with your life insurance policy. So it could be worth thinking twice before cancelling.
Did you know it might be more expensive to take out a new policy at a later date? This is because life insurance typically gets more expensive as you get older. Also, in the period between first taking out your policy and now, your family medical history may have changed and this could affect the cost of a new life insurance plan. It's worth noting that you might not be able to replace the cover if your health has changed.
It's worth bearing in mind that many life insurance policies have no element of savings or investment and no cash in value at any time. As soon as you stop making your monthly payments, your cover will usually stop as well. So you might not get anything back.
Terminating a policy could leave your family, partner or household without a financial safety net. That's because life insurance protects your family when you die, some policies also pay-out if you are diagnosed with a terminal illness from which you are expected to die within 12 months.
If you were to die or be diagnosed with a terminal illness while your policy was in force, your family could be able to benefit from a lump sum or regular income. This money could help them stay afloat financially. So, think twice before you hit 'cancel life insurance'.
Am I getting a good deal?
Life insurance isn't like insuring your home or car. If you stop and start a life insurance policy you may not get such a good deal the second time.
For example, if Susan takes out a policy in her early 20s, the cost of her life insurance will reflect her age. As the years go by, the monthly payments on any new policy that Susan takes out are likely to rise in line with her age. New medical conditions that she develops in between stopping a policy and arranging a new one could be excluded from a future plan.
When you need more cover
If you're thinking of cancelling a life insurance policy because you need more cover or want a longer term, there could be other options available. Seek advice on the ways you could change or modify your policy before immediately cancelling.
Questions to ask yourself
There are a number of things to take into consideration before deciding whether or not to cancel your plan. If you're considering cancelling the policy because it no longer meets your needs, it may be possible to upgrade, increase or change your plan without having to cancel it completely.
Life insurance should offer some peace of mind for both you and your dependants. It could also be a financial lifeline for your family when you die. For this reason, it's a good idea to think carefully before you cancel or stop paying into a plan.
Contact your financial adviser if you are still considering cancelling your policy. You can also contact Royal London.
