Canceling your life insurance terminates your coverage. If your financial liabilities and future obligations still exist, canceling your life insurance will put your beneficiaries at risk. If you have cash value life insurance and there is gain in contract, you may trigger an ordinary income taxable event.
Also keep in mind that if you should cancel a whole life insurance policy yet decide to purchase another later on, the cost will have increased. They unfortunately increase with age, so this is something to seriously think about. Also as Steve mentioned, you put your beneficiaries at risk.
Self-employed Employee Benefits Provider, Upland, California
My answer would be "don't do it unless absolutely necessary"! The reasons mentioned above are great, but also think about your health which will affect what you premium payments would be. Several health issues will affect your premiums:
Smoking, if you quit for a year some companies will give you a better rate.
High Blood Pressure
Diabetes
Many many others.
It is becoming increasingly harder today to get an insurance companies best preferred rate. This is due to better testing and reporting by your doctors. So if you have a good rate on your policy when you bought it the odds are you won't qualify for that same rating several years later.
Many people fear that they will have to pay a penalty if they cancel their life insurance. There is no monetary penalty to be paid. Term life insurance has no cash value, so the policy just ends when you cancel it. Cancelling cash value life insurance in its early years may cause you to lose some of the cash that was accumulated, but you will not owe anything beyond what is in your policy.
That being said, if you are trying to cut down your expenses for a time, cancelling your life insurance should be far down the list of things to cut. When you go to buy life insurance again, the price is usually higher simply because you are older. If you have developed any health issues, the price can easily double or more.
Rather than cancelling your policy, you might want to look into reducing the face amount, or having your cash value pay the premiums for a while. If your agent is no longer around, feel free to call me and I will try to help you figure out if you still need life insurance, and if so, how to keep it in your portfolio.
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Smoking, if you quit for a year some companies will give you a better rate.
High Blood Pressure
Diabetes
Many many others.
It is becoming increasingly harder today to get an insurance companies best preferred rate. This is due to better testing and reporting by your doctors. So if you have a good rate on your policy when you bought it the odds are you won't qualify for that same rating several years later.
That being said, if you are trying to cut down your expenses for a time, cancelling your life insurance should be far down the list of things to cut. When you go to buy life insurance again, the price is usually higher simply because you are older. If you have developed any health issues, the price can easily double or more.
Rather than cancelling your policy, you might want to look into reducing the face amount, or having your cash value pay the premiums for a while. If your agent is no longer around, feel free to call me and I will try to help you figure out if you still need life insurance, and if so, how to keep it in your portfolio.