Cancelling your life insurance policy and the cooling-off period explained
Cancelling your life insurance is an important decision that shouldn’t be taken lightly. However, it is easier to cancel than you may think and you are free to do it at any time.
Whether you have whole-of-life or term life insurance you are legally allowed to cancel your policy with your insurer when you see fit.
By cancelling your policy, it means your dependents will not receive a tax-free lump sum from your insurer upon your death and you will not be able to make a claim on your newly cancelled policy.
To ensure you are making the right decision by cancelling your plan and to make sure you do it correctly, we have created this guide to answer any queries you may have about the process.
It is the third guide in our six-part guide series on how to get the best value life insurance cover.
You can find the other articles in the series at the bottom of this guide.
The right to change your mind
If you change your mind and decide you no longer want to follow through with your life insurance policy within 30 days of obtaining it, you will be able to get a refund on the premium you’ve paid so far from your insurance provider.
This 30 day grace period is known as the cooling-off period. It begins from your policy start date or the day you receive your policy documents (whichever comes later).
Although you are entitled to a refund within the cooling-off period, you may not receive the full amount as your insurer may deduct money to cover the administration costs associated with cancelling your policy.
The fees your refund is subjected to will depend on the insurance company. You can find the information related to these cancellation charges in the terms and conditions of your policy.
How do I cancel my new policy?
Cancelling your life insurance policy is quite straightforward but it's not as easy as simply cancelling your direct debit payment to your insurer. Instead, you will need to inform your insurer that you want to cancel your policy.
You must send your insurer your intentions to end your cover in writing. This written declaration must be signed by all the people on the policy, to confirm that you all want to cease your life insurance cover.
If you are considering cancelling your cover we recommend speaking with a financial advisor first. This is because you will no longer be able to make a claim on this cover once it is cancelled.
Will I get a refund if I cancel after the cooling-off period?
You are free to cancel your policy whenever you like, even if you have had it for the last 15 years. However, if you cancel your life insurance policy after the 30-day cooling-off period has ended, you are not legally entitled to a refund on any of the premium you have paid.
You also shouldn’t be subjected to any extra costs for cancelling your policy, but this can depend on the terms and conditions of your insurance company. It is important to check.
Why should I seek out a financial advisor if I want to cancel my policy?
Unlike car insurance which you renew annually, the period of a life insurance policy can last for your entire life or a set period such as 10 or 20 years.
If you decide to cancel your policy after 15 years that is a sizable investment that you will be losing. This is why we recommend you seek out financial advice before you make this decision so you can weigh up your options together.
I want to switch to another policy, when should I cancel my existing cover?
We encourage you to not cancel your existing cover until the life insurance policy you are moving to is up and running. This is because your new policy could be delayed or your application for it could be declined, which would mean you do not have any financial protection if you were to pass away.
If you have aged significantly or acquired health issues since you signed up for your initial life insurance plan you may not be able to avail of a new policy that has the benefits and price range you desire.
Therefore, it’s important to explore your options and ensure you can sign up for a new policy first, before cancelling your current one.
Why do people cancel their life insurance policy?
As time passes a person’s motivation to have a life insurance policy may change and it may no longer be necessary.
You may decide to cancel your policy for the following reasons:
1. Your dependents are now financially secure.
If you took out your cover when you had young children, and they have now grown up and are financially stable, there may no longer be a reason to have a policy.
2. You have paid off your debts.
If you initially took out a life insurance policy so that your loved ones would not have to pay back any loans or debts you had if you passed away unexpectedly, and you’ve now paid these loans off, the purpose for having this life cover may be void.
3. You do not have the same financial obligations you once had.
Maybe you have inherited a large sum of money, paid off your college funds or finished raising your family, and no longer require the financial security a life insurance policy would provide anymore.
4. You are unhappy with your policy.
Maybe you want to move to a cheaper policy or to a policy with greater benefits. Whatever the case, if you are cancelling your policy to switch to a new one you should ensure that your new policy is up and running before cancelling your existing one.
5. You can not afford to pay your insurance plan.
If you are struggling with your finances, life insurance should not be your first option if you are trying to lower your expenses. In fact, your financial struggles may indicate the necessity for your life insurance cover as your dependants would likely be financially insecure upon your death.
In these cases, we encourage you to contact your insurer and a financial advisor to discuss your options before you make your final decision.
If I cancel my policy now, can I get the same level of cover years later?
The cost of life insurance and the level of cover you will receive later in life will depend on your age, health and new life insurance company.
Often the younger you are when you take out a life insurance policy, the cheaper it is. If you decide to cancel your policy now, to only reinstate it later in life you need to be aware that your life insurance costs will most likely be more expensive.
Why is this?
The older you are, the more likely you are to suffer from health issues, meaning you are more of a financial risk to insurers offering you life cover.
Therefore your life insurance premium will be higher and you may no longer be eligible for some current benefits on your existing policy due to your health.
We encourage you to take this into account when deciding on whether or not you should cancel your current life insurance policy.
Can my insurer cancel my policy?
Yes, your insurer is legally allowed to cancel your life insurance for a variety of reasons.
For instance, if the information you provided when applying for your cover was false or inaccurate, or if you failed to disclose necessary information related to your health for example, your insurer can cancel your policy.
If you fail to keep up with your insurance payments, your policy will automatically lapse after 30 days and you will no longer be covered by your insurance plan. Some insurers will allow you to re-start your policy if your payments only stopped for a short time.
However, if you have not paid your premium for several months, it will have been cancelled and you will need to take out a new policy.
Discover the right life insurance policy for you on bonkers.ie
Did you know that you can apply for life insurance on bonkers.ie?
All you need to do is provide us with your life insurance requirements and we will start comparing policies.
So make sure to apply online with us today to see if you could get cover in less than an hour!
Become an expert in life insurance
If you found this guide helpful, why not check our other articles on how to get the best value life insurance policy on bonkers.ie.
- In this synopsis guide, we outline the different articles in the series and what they cover.
- Discover how you can compare and apply for life cover in 8 simple steps on our site.
- Get to grips with life insurance-related terms in this guide.
- We answered the 15 most common life insurance questions asked by applicants.
- Here are 10 things to consider when taking out a life insurance policy.