Can I cancel my life insurance and get a refund?
We’ve all been there. Every few months you review your direct debits, trying to remember what each one is and cancelling the ones that you either don’t recognise or don’t use. Amazon Prime is the long-standing direct debit that will forever appear on your list of outgoings, but your life insurance? Do you really need that? You’ve never used your income protection insurance or critical illness insurance policy so would it really matter if you cancelled them?
We think it really does matter, but we also understand that there may be times when you need to cancel a protection insurance policy. In this guide we explain why you might want to cancel a policy and what happens when you do.
The answer to this question is yes! Although you’d typically buy a protection insurance policy to cover you and your family for many years, you’re not tied in in any way and can cancel any of your life, critical illness or income protection insurance policies whenever you want.
One of the most common reasons that people end up cancelling their cover is cost, they decide to cut back on their spending and realise that their budget no longer allows for protection insurance. They cancel their policies and decide to buy cover again in future when their finances are in better shape and they have the spare cash. Makes sense, but there are a few pitfalls to be aware of with this plan. Protection insurance is cheaper, the younger you are, so you may actually find that when it comes to buying a policy again, cover may in fact be less affordable because you’re older. Plus, it not only becomes more expensive, it can also become harder to buy life insurance if you have health conditions, so if your health changes between when you cancel your policy and when you try to buy another policy, you may face a few hurdles.
If you’re struggling with the cost of your life insurance, income protection insurance or critical illness insurance, it’s worth chatting with either your broker or your insurer directly before you take the big step to cancel your cover. They may be able to help you by suggesting a few cost-cutting measures, like reducing your level of cover, for example. That way, you can keep your insurance policy in place, but at a lower cost, and can increase your cover to its original level when you can afford to. We strongly suggest keeping your level of cover in place though, as otherwise to increase it again in future would mean new medical underwriting and other considerations; which could make it more expensive in the long run.
Another reason people often think about cancelling their life insurance is that they simply don’t think they need it any more and would rather use the money for other things. When we buy a product or service, we’re usually paying to use something, but in the case of life insurance, it’s quite the opposite - we don’t actually want to use the product! We’re basically paying for peace of mind, something that we can’t really touch, feel or use, so it’s easy to see how some people decide to get rid of their protection insurance, favouring those purchases which give them that instant gratification. But before you think about cancelling your cover, it’s worth checking what this would mean for your loved ones. Do you have a mortgage that your policy is linked with? Do you have adequate savings or another financial safety net that could step in if ever you couldn’t work and your family lost your income?
If you have an existing protection insurance policy that you’re thinking about cancelling, give the LifeSearch team a call on 0800 316 3166 for support and information on your options.
The first thing you can do is simply cancel your direct debit. This will stop your monthly insurance premiums from being paid. Your insurer will contact you to collect the missed premiums a couple of times and if you fail to make a premium payment, your insurer will cancel the policy for you.
Alternatively, and we think this is the better option, you can contact your broker or insurer directly and explain that you’d like to cancel your policy. They will work with you to understand why you’re looking to cancel and suggest some options to help you and your family stay protected - and if necessary, can help you with alternative options.
And just so you know, you shouldn't pay any fees or charges for cancelling your policy.
The answer to this is usually no.
Protection insurance is a simple product that protects you financially against death and illness while you pay premiums. If you don’t pay your insurance premiums, you aren’t protected. It’s a bit like car insurance - if you move to a different car insurer when your policy comes up for renewal, you aren’t refunded the monthly premiums from your previous car insurer.
There is one exception to the rule though, and that’s if you cancel your policy during the cooling off, or grace, period. Most protection insurance policies come with a grace period of 30 days, so if you buy a policy and then change your mind and decide to cancel the policy within the first 30 days, you can get a refund of the premiums you would’ve paid so far.
All protection insurance policies are different, so always check your personal policy T&Cs for the specific details around cancellations and your cooling-off period. Alternatively, give your insurance broker a call.
We’re here to protect the lives you love. Call us on 0800 316 7253 or request a callback from one of our expert protection advisers who will happily answer any questions you have. We look forward to chatting with you soon.
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