What to think about before cancelling life insurance

Common reasons for cancelling a policy:

• You may have started a new job and life cover is included as part of a benefits package
• You feel young, fit and healthy
• You no longer have a mortgage
• You are retired
• Family budget is tight
• You are not confident the policy will pay out
• You think you can get cover cheaper elsewhere.

There are things to consider if you are planning to cancel a policy, lets look at some of the implications:

• Any employee benefits are temporary as they rely on your employment continuing
• Any medical issues may preclude you from arranging cover in the future or mean the premiums are higher, taking into account the risk
• If you do decide to take out cover in the future then this will almost always be more expensive due to being older.

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. 

• 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'. 

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.

Most modern protection policies are flexible enough to change as your family, your lifestyle, your career and your housing evolve. You may be able to make the following amendments without just cancelling the policy:

• Shorten or lengthen the term
• Increase or decrease the amount of cover
• Add additional covers to the plan
• Add or remove a person from or to the policy for example marriage or divorce.

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 us on 0345 602 1885 or visit our contact page.