Have you ever signed up for a service or monthly subscription and later found out that you were locked in and could not cancel? Most of us have experienced this in some form or another, and it can cause a great deal of frustration.
Our clients often ask, “Can I cancel my burial insurance policy at any time?” The answer to this question is pretty straightforward as the majority of life insurance policies have a 30-day free look period. As the policyholder, if you wish to cancel the policy during the first 30 days, you can do so and receive a full refund of your first month’s premium.
After the 30-day free look period, you can still cancel the policy, but the monthly premium would not be refunded. To cancel the policy, you can call the insurance company directly to inform them you no longer need the policy, or you can simply stop making your monthly payments.
We recommend that you consider all aspects of the situation prior to cancelling your policy. Let’s take a look at the three most common reasons people cancel their life insurance policies and things to consider before cancelling.
The primary reason for cancelling a burial insurance policy is due to financial hardship. This is not uncommon with our clients as most of them are retired and on a fixed income. If an unexpected bill or payment arises, it can be difficult to stretch the monthly budget. Insurance is often the first payment people choose to skip. Typically burial insurance policies have a 30- to 60-day grace period during which the insured can make the missed payment and avoid cancellation of the policy.
Before you let a policy lapse, consider the potential difficulty of replacing the policy in the future should your financial circumstances change. A new policy may become unaffordable or unattainable because of age and health complications.
It’s often a difficult conversation to have, but we recommend that the insured seek financial assistance from a family member or friend to cover the monthly payment instead of cancelling the policy. By helping with the insurance payments, the family may avoid a lot of financial burden in the future should the insured pass away without having a life insurance policy in place.
The second reason people cancel a burial policy is they feel the policy is no longer necessary. Perhaps the policy was purchased in order to pay off a debt should the insured pass away before the debt has been paid. If the debt is paid off, the insured may feel there is no need to keep the insurance policy in place. In this type of situation it often makes sense to cancel the insurance policy. However, before cancelling the policy, you should consider other uses for the policy. A burial insurance policy could be used to pay for an individual’s final expenses or burial costs, as well as potential medical bills or debts incurred prior to passing. The death benefit could also allow the insured to leave a small inheritance to those left behind.
The third reason people often cancel a policy is that they have purchased a different policy. The insured may feel that they have found a better policy for a cheaper price, so it makes sense to cancel the original policy.
Before cancelling a policy, we recommend that you confirm you’re comparing apples to apples. You should confirm that the new policy’s monthly payment is fixed for the life of the policy, meaning it will never change. Also, you should confirm that the policy doesn’t have a cutoff point, meaning the policy terminates when you reach a certain age.
Lastly, confirm that the policy has no waiting period. If the new policy has a two-year waiting period, the policy must be in place for a full two years in order for the beneficiary to receive the full death benefit. If the insured passes away during the two-year waiting period, the death benefit paid to the beneficiary would only be the monthly premium plus interest.
It’s important to ensure that you’re not replacing your current policy with one of lesser value. We hope that this provides some insight into things to consider prior to canceling an existing insurance policy.
If you have questions about your current policy or would like to explore your life insurance policy options, you can speak to one of our agents at 866-699-1884. We are licensed in most states and would be glad to answer any questions or concerns that you may have. We offer quotes on burial insurance, term life insurance and whole life insurance quotes.