How to cancel your life insurance policy

A step-by-step guide to canceling your policy.

Logan SachonAnna Swartz 1600

Logan Sachon & Anna Swartz

Published October 2, 2019


  • There are a number of reasons someone might want to cancel their life insurance policy

  • You can generally cancel a life insurance policy at any time, either by halting payment or calling your insurer

  • Unfortunately, unless you cancel immediately after getting the policy, you won’t get a refund on your premiums

There are many reasons that you may want to cancel your life insurance policy. Some reasons make good financial sense (like if you’ve paid off your loans early and no longer need a policy to cover them) and some don’t (like if you want to spend your monthly premium payments on takeout instead).

Whatever your reason is, canceling your life insurance policy is relatively simple. But the process is different depending on how long you’ve had your policy and whether you have term life insurance or whole life insurance. Here’s what you need to know.

In this article:

How to cancel your life insurance

The process of canceling your life insurance policy can be different depending on if you have term life insurance or whole life insurance. Canceling term insurance is generally much simpler than canceling whole insurance.

With either type, you can cancel your life insurance policy at any time, but when you cancel your policy affects whether or not you’ll be able to get any of your money back.

Canceling during the “free look” period

If you immediately regret your life insurance purchase, you may be able to cancel it without penalty or cost if you’re still within the “free look” period, which is the time immediately after buying a life insurance policy when you can cancel it without recourse.

The free look period is mandated by the state and can be between 10 to 30 days, so check your policy or ask your insurer how long your free-look period is. If you cancel during the free look period, any premiums you have paid will be fully refunded.

Canceling your term life insurance policy

There are two ways to cancel a term life insurance policy.

1. Stop paying premiums. If you don’t pay your premium within the defined grace period — the mandatory period set by your policy during which you can pay your premium without canceling your coverage — your insurance is canceled. That’s usually a bad thing, but if you want to cancel your term life insurance policy, it’s that easy: just don’t pay.

2. Write a letter. Provide written notice to your insurer that you’d like to cancel your policy. Some policies detail in their contracts that issuing a stop-payment order for your payments is considered written notice, but you can also write a very simple letter.

An example of a term life insurance policy cancellation letter:


I’m writing to cancel my policy, effective DATE.

My policy number is POLICY NUMBER.

Please return any unused premiums to ADDRESS.

Sincerely, NAME

Your life insurance provider may also allow you to cancel through a form or a phone call.

Canceling your whole life insurance policy

Canceling a whole life insurance policy is more complicated than just stopping payments. Each policy has slightly different forfeiture rules, but generally, canceling whole life insurance starts with a call to your insurer. What happens after that will depend on how long you’ve owned the policy and your insurer’s rules, but there are three general options:

  1. Cash out the policy, if possible. One of the appeals of whole life insurance is that it has a cash value. The first few years of your whole life policy are the “surrender period” (the exact time length will be set in your policy). If you cancel during this period, there will be fees and penalties and there may be no cash value to redeem.

If you cancel within the first 10-20 years (again, check your policy), the cash value of your policy may be subject to high fees from your insurance company. And while a life insurance death benefit isn’t taxable income, cash value from a policy that you cancel is taxable.

  1. Reduced paid-up option. Some insurers will offer a reduced paid-up option, which keeps allows you to stop paying premiums and keep a reduced death benefit on your whole life policy.

  2. Let it lapse. If you stop making payments, some insurers will automatically cash out your whole life policy; others will let the policy lapse, in which case you may be able to reinstate it within a set period. You’ll likely have to pay back premiums and go through underwriting again, but the cost could be less than buying a new policy.

Learn more about canceling your whole life insurance policy.

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Do you get money back when you cancel a life insurance policy?

When considering canceling your life insurance policy, it’s important to know what will happen afterwards. Whether you’ve been paying life insurance premiums for months, years, or decades, you’ve put a lot of money toward the policy. Will you get any of it back? The answer is, probably not. Here’s what happens after you cancel a life insurance policy:

1. You no longer have life insurance. The most obvious result of canceling your policy is that you will no longer have life insurance, and your family will not receive any of the death benefit when you die. Even if you've dutifully paid premiums for years, once your policy is canceled, your coverage is canceled, too.

2. You forfeit your premium payments. Less obvious is that once you cancel your life insurance policy, you will not get any of your paid premiums back. If you have a term-life policy, you won’t get any refund or cash if you cancel your policy or let it lapse. (Whole life policies with a cash value may provide some cash when canceled.)

The one exception: If you cancel your policy mid-payment cycle, you may be refunded unused premiums, that is, premiums paid for dates between the date of cancelation and the due date of the next premium.

3. You will have to reapply for new coverage. When you cancel your life insurance policy, you are also forfeiting your current rates. If you decide you want life insurance coverage again in the future, you have to take a new medical exam and go through underwriting again, meaning that your rates could be much higher. Your lower rates, set when you were younger and (probably) healthier, will be gone forever.

Can your insurance company cancel your life insurance policy?

Your insurance company can only cancel your policy in very specific instances detailed in your policy.

Reasons your insurer might cancel your coverage include:

  • Non-payment of premiums. If you don’t pay your premiums within the grace period, your policy will be terminated.

  • Fraud. The first two years that your policy is in force is called the contestability period. During that time, the insurer reserves the right to investigate your cause of death and to cancel your policy if it finds that you lied on your application.

Your insurance company cannot cancel your policy for any other reason, including if you gain weight, start smoking, develop a dangerous hobby, or get sick.

Group life insurance

One exception to this general rule about cancellation is that your group life insurance policy can be cancelled by your employer at any time if they choose to stop offering the coverage.

Additionally, your coverage through the group policy will terminate when you leave the job that provides it, unless you convert it to an individual policy, which may be a possibility.

Reasons to cancel life insurance

There are many reasons people may consider canceling life insurance.

  • You no longer need it (for example, your kids are out of school, your mortgage is paid off)
  • You can no longer afford the premiums
  • Buyer’s remorse
  • Your want to separate your retirement investments from your life insurance (this applies to whole life only)
  • You want to access the cash value portion of your policy (this applies to whole life only)
  • You have found life insurance coverage at a better rate, either because of industry-wide price drops or because your health has improved

Alternatives to canceling life insurance

If you want to cancel your life insurance policy because your premiums are too high or because your health has changed, there may be a way to change the terms of your policy without canceling, depending on the type of policy you have.

Before you cancel your life insurance policy, it’s worth considering your alternatives:

  • Lower your coverage amount. Most insurers will let you decrease your coverage amount at least once. Talk to your insurer about lowering your policy’s coverage amount, which can reduce your premiums.

  • Ask for a new medical exam. If you’ve lost weight, quit smoking, or made another significant lifestyle change, you could qualify for lower premiums; talk to your insurer about the possibility of taking a new medical exam once you’ve had your policy for a year.

  • Arrange for the cash value of the policy to pay for the premiums (whole life only). If you have a whole life policy with a cash value, you may be able to use the cash value to cover your premiums. Talk to your insurer.

A Policygenius expert can help you find a better rate on a life insurance policy.