How to cancel your disability insurance policy

You can cancel your disability insurance policy by stopping your premium payments or contacting your insurance company

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Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

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If you've decided you no longer need disability insurance, you can easily cancel a policy by contacting your insurance provider or by letting your coverage lapse due to nonpayment.

Before choosing to cancel your policy, make sure you're financially protected if you do become disabled.

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Key takeaways

  • Cancelling your disability insurance could leave a gap in your income if you become ill or seriously injured.

  • The insurance company can’t cancel your benefits without a review, which can happen if you violated your policy.

  • You can’t cash out disability insurance benefits, but can get partial refunds with a return-of-premium rider.

How to cancel your disability insurance

To cancel your disability insurance policy, you can simply stop paying your premiums. When you don’t make payments after the grace period set by your insurance company (usually 31 days), your policy will be terminated. You can no longer file a claim, and you will have forfeited all paid premiums.

If you pay premiums annually and you've already paid the year's premium, you can still contact your insurer to cancel. You should be able to get a prorated refund.

If you change your mind about canceling, you'll likely have to apply for a new policy, but it's worth contacting your insurance company to ask about reinstatement. Some companies may reinstate your disability policy if you pay back any past-due premiums.

→ Learn more about how disability insurance works 

Why you might want to cancel your disability insurance

There are several reasons why you might consider canceling your disability insurance policies. Here are the most common:

  • You get a new job that provides disability insurance. 

  • You can no longer afford the premiums.

  • You no longer need income protection, due to a windfall or inheritance, for example.

  • You are close to retirement age and can replace any possible lost income with your savings.

What to do before you cancel your disability insurance

Canceling your disability insurance coverage comes with its own set of considerations. If you do decide that you want coverage again in the future, you'll need to take a new medical exam and can pay higher rates due to changes in your age, income, or health.

If you want to cancel because a new job provides disability insurance:

When you leave your current job, you'll lose the disability coverage that comes with it. If your employer pays your premiums, your disability benefit is taxed, which could leave you with less income than you expected (since you may be responsible for more income tax). Employer-provided disability coverage may not take into account any bonus or commission income, which could also leave you with limited income.

Your employer-provided coverage may have other significant limitations, like lower coverage amounts, compared to your private policy. Worker’s compensation, for example, only pays benefits if you are injured on the job. 

If you want to cancel because you can no longer afford the premiums:

Disability insurance is an important safeguard, and other cuts to your budget may be more prudent — but if you become disabled and can't work, you may end up in an even more difficult financial situation.

You won't be able to simply resume your coverage when your circumstances change. You'll have to apply for a new disability policy, and likely at a higher rate given your new condition.

→ Compare quotes and find affordable disability insurance with Policygenius

If you want to cancel because a windfall means you're no longer reliant on your income:

Will the money truly last the rest of your working life? An inheritance may not last as long as you hoped for, and disability insurance can protect your income while allowing you to use that extra money towards something else.

Plus, if you end up needing to work again, you may need disability coverage and re-applying later could mean much higher premiums.

If you want to cancel because you are close to retirement age:

This is actually a good reason to cancel, since most policies will only pay out benefits up until age 65. If you're getting close and have enough savings to offset early retirement, it may make more sense to save or invest your remaining premium payments. But first, make sure that if you cancel and something were to happen the next day, you could truly pay for everything with your savings.

Can your insurance company cancel your disability insurance?

Most disability insurance policies are guaranteed renewable, which means your insurance company cannot cancel your policy as long as you pay the premium. As long as you’re honest with your insurance company during the application process and continue to pay your premiums, you don't need to worry about your benefits being canceled.

Then the insurer may stop your disability benefits, though, if you’ve violated your policy for any of the following reasons:

  • You lied on your application.

  • You made a false claim.

  • You continued to receive benefits when you're no longer disabled.

  • You failed to apply for Social Security Disability Benefits to offset your private disability benefit.

  • You failed to receive regular treatment for your disability or medical condition.

Even if you follow all the rules, your benefits don't last forever. Your insurance contract will stipulate when your benefits expire. For some policies, it's when you reach age 65 (at which point you can start collecting Social Security). Other policies have set benefit period — two, five, or 10 years — that you choose when you sign up for the policy.

Consult your policy or talk to a licensed agent at Policygenius to find out what requirements you must meet to keep your disability insurance policy active.

Frequently Asked Questions

How do I cancel my disability insurance?

Call the insurance company to cancel your policy or let it lapse by not making premium payments.

When can you cancel disability insurance?

You can generally cancel your policy at any time, but you may want to keep your coverage unless you’re certain you can pay for all your expenses should a serious illness or injury leave you without an income.

At what age should you drop disability insurance?

Disability insurance helps protect your income, but if you need to cancel it’s best to do so when you’re closer to retirement age since benefits typically stop when you turn 65.

Can you cash out disability insurance?

Unlike certain types of life insurance, you can’t cash out your disability policy — unless you have a return-of-premium rider, which can pay out a lump-sum refund when you reach certain milestones.

Author

Editor & Licensed Life Insurance Expert

Amanda Shih

Editor & Licensed Life Insurance Expert

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Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

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