Don’t just cancel your life insurance policy! By doing so, you’re exposing yourself to risk and losing out on potential benefits. Instead put a stop payment on your premiums with your bank.
If you write to the insurance company and cancel your policy then the policy is over immediately with no further recourse.
By contrast, if you stop payment on your policy rather than cancelling it, your policy will go into what’s called a grace period. For the next 30 days your policy is still in force but with a month’s premium outstanding. After the 30 days the insurance company will automatically cancel the policy on their own.
There are two reasons for this approach. First, should you die in the 30 day grace period your policy is still in force. Your beneficiaries would simply need to make up the premium that you skipped, and the claim would be processed normally. In other words, you get a free 30 days of coverage that you don’t get if you cancel.
Secondly you also maintain the option of reinstating the policy during the 30 day grace period. If something changes during the 30 days (such as your insurability) you may want the policy back. If you cancelled the policy you’re likely out of luck. If it lapsed for non-payment then you can simply make up the premium and the policy will continue on, no medicals required.
Two other things to note. First if you’re replacing a life insurance policy with a new one, your broker must have you sign a form that compares both the old policy and the new one. And secondly, never cancel your old policy until your new one is fully inforce and irrevocable. People who find out they can’t qualify for a new policy is more common than you think – and if you’ve cancelled your existing policy you’ll be left with no coverage at all.
If you’re considering cancelling your existing insurance and replacing it with a new policy, feel welcome to contact our office for a second opinion.