Agent Owner, Gilmore Insurance Services, Marysville, Washington State
What happens when you cancel life insurance? You end your coverage on the date you provide. Any cash values or unused premium in your policy will be returned to you. With term insurance any unused premium will be refunded. Cancelation should be done in writing as cancelation often requires a signed document.
1) With TERM insurance, there is no penalty and you lose no cash value, because there was not any cash value to start with.
2) With PERMANENT insurance, you may take the cash value, minus surrender charges and fees, if any. If you do not have enough cash value to cover the fees, you owe nothing and receive nothing. The cash value may be taxable.
There are other options than cancelling a policy if you can no longer afford it. You may be able to reduce the face amount, turn the policy into a reduced paid up policy, roll the cash value over into a new policy, or other options. Because at the end of the day, if you cancel your life insurance, you no longer have that protection. So consult with someone to find out your best choice in making that decision.
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1) With TERM insurance, there is no penalty and you lose no cash value, because there was not any cash value to start with.
2) With PERMANENT insurance, you may take the cash value, minus surrender charges and fees, if any. If you do not have enough cash value to cover the fees, you owe nothing and receive nothing. The cash value may be taxable.
There are other options than cancelling a policy if you can no longer afford it. You may be able to reduce the face amount, turn the policy into a reduced paid up policy, roll the cash value over into a new policy, or other options. Because at the end of the day, if you cancel your life insurance, you no longer have that protection. So consult with someone to find out your best choice in making that decision.