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What Are the Implications from Cancelling Life Assurance?

Look before you leap, er, cancel!

Your life assurance policy is an asset and as such, cancelling your policy requires serious consideration. You may cancel your policy any time but you should do so only after you have studied its implications.

There are some reasons why people cancel their life assurance policies.

For instance, if the life assurance cover was taken due to a mortgage and you are able to pay off the entire mortgage earlier, then you can cancel the coverage. There are also instances, where premiums on new policies are cheaper than what you already have. Other reasons include the loss of your job (where you can’t afford to keep on paying the premiums), a divorce, a need for some capital or cash or a change in your family situation.

As much as possible, it is best to keep your life assurance policy until maturity. But if you are decided upon cancelling your policy, then you should know what you may lose by doing so.

However, you should also remember that you will have to undergo new medical exams and your waiting period will also be reset to zero.

What You May Lose When You Cancel Your Policy

  • Life insurance cover.

    You will lose the life insurance protection provided by the policy. This means that if something happens to you, your beneficiaries can no longer claim for the death benefits that they would have received had the policy been allowed to stay in force.

  • Possible changes in premiums.

    If you decide to get another life assurance policy later, the rates will more often than not be more expensive than what you are currently paying for now. There may be changes in your medical condition that will warrant new and higher premium rates.

  • Completed waiting period.

    When your old policy was first issued, there is usually a waiting period. During this waiting period, the insurance company can contest any claims made if there is proof that some misrepresentation occurred. When you take on a new life assurance policy, your waiting period will reset.

  • Potential investment earnings.

    When you are thinking of cancelling a life assurance policy, especially one that has been in effect for years now, you may lose investment income for the money that has already been vested on a certain portfolio. There will also be penalties when cancelling a life assurance policy early.

  • Another important caveat:

    Be sure that you are already covered by your new policy prior to your application to cancel your old policy, just to ensure that you have coverage at all times.

To protect your loved ones for less, fill the form on the right to get your life insurance quote.