If you cancel a life insurance policy, first and foremost, the policy will not pay a death benefit to your beneficiary if/when you pass away.
If the policy is Term insurance, there is no cash value to collect and no surrender charge to pay, no matter when you took out your policy. However, if you took it out within the year, your agent may lose all their commission from that sale and could be penalized by the insurance company.
With Whole or Universal Life, there will be a surrender charge that reduces the cash value you would collect upon cancelling your policy. However, you may be able to roll your full cash value over into a new policy. Or you may have the option to change your policy to a reduced paid-up policy, in which you get to keep some death protection even though you are no longer paying a premium. Discuss your options with your agent; you may be surprised at the options you have.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
What happens if I cancel an life insurance policy? Well first any unused premium past the effective date of your cancelation is returned to you. If you are cancelling a cash value policy, the cash values minus any surrender charges (if any at all) will also be returned to you.
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If the policy is Term insurance, there is no cash value to collect and no surrender charge to pay, no matter when you took out your policy. However, if you took it out within the year, your agent may lose all their commission from that sale and could be penalized by the insurance company.
With Whole or Universal Life, there will be a surrender charge that reduces the cash value you would collect upon cancelling your policy. However, you may be able to roll your full cash value over into a new policy. Or you may have the option to change your policy to a reduced paid-up policy, in which you get to keep some death protection even though you are no longer paying a premium. Discuss your options with your agent; you may be surprised at the options you have.