How to Cancel a Life Insurance Policy

Canceling term life insurance is straightforward. You inform your insurer and stop your payments. You can cancel at any point during your contract.

You'll get a full refund if you cancel within the free look period. This period lasts anywhere from a week to a month or more, depending on your insurer and state regulations. Ask about the length of the free look period before buying any policy.

What happens next depends on whether you're canceling term or whole life insurance and when you decide to cancel. Know these rules to understand what to expect, including potential refunds or cancellation fees.

Canceling a term life insurance policy is straightforward. It usually doesn't involve penalties or fees.

You have three options:

1. Stop paying premiums

You can let your policy lapse by not paying your insurer. Your policy will end after the grace period, usually 30 to 31 days after your payment due date.

While this approach requires no paperwork, it's not always the cleanest way to cancel. Your insurer may continue sending notices and potentially report the lapse to credit agencies if you have automatic premium loans or other policy features.

You may not receive confirmation that your policy is officially canceled, which could create confusion later. If you choose this method, contact your insurer after the grace period expires to confirm your policy has been terminated and request written confirmation for your records.

2. Send a letter to your insurer

A written notice is a quick way to let your insurer know you want to cancel. When sending your life insurance cancellation letter, use certified mail with a return receipt requested. This creates a paper trail proving your insurer received your cancellation request on a specific date.

Keep copies of your letter, the certified mail receipt, and the return receipt in your records. If you don't receive written confirmation within two weeks, follow up with a phone call to verify your cancellation was processed.

Your insurer may also provide an online cancellation form. They can guide you through canceling term life insurance, whether you prefer to complete it online or over the phone.

Some companies may require you to complete their specific cancellation form rather than accepting a general letter, so check your policy documents or contact customer service to confirm the preferred method.

3. Call your insurer

Some insurers have a dedicated cancellation hotline to process your request immediately. Check their website for the number.

Phone cancellation offers the fastest resolution, often allowing you to cancel your policy within minutes. The customer service representative can walk you through any required steps, answer questions about refunds or final payments, and provide immediate confirmation of your cancellation.

After the phone call, request written confirmation of your term life insurance cancellation via email or mail. Keep detailed notes of your conversation, including the representative's name, the date and time of your call, and any confirmation numbers provided.

Canceling permanent life insurance, including whole and universal life, is more complex because these policies build cash value. Unlike term life policies, permanent policies include a nonforfeiture clause. This clause means you can receive full or partial benefits or a partial refund after nonpayment. What you receive depends on your insurer.

1. Surrender or cash out your policy

Whole life policies accumulate cash value over time. If you withdraw during the surrender period (typically the first few years), you'll face steep surrender fees or receive no cash value. After the surrender period, you'll likely get some funds but may still pay a surrender fee. Your policy ends once you withdraw the cash value.

2. Sell your insurance

Your policy is an asset you can sell to a third party. If cancellation seems too complex, selling offers a straightforward solution. Research and contact a reputable broker. The buyer receives the death benefit when the insured passes away. A 1035 exchange lets you trade your policy for another financial product without tax implications.

3. Let it expire

Some insurers automatically terminate and cash out your policy if you stop paying. Others use your cash value to cover premiums until it's depleted. Both options may involve surrender fees and taxes.

4. Choose a reduced paid-up option

Some insurers let you stop payments while keeping the policy active with a lower death benefit. This depends on how much you've already paid. Contact your insurer to see if they offer this option.

The exact process and what you receive vary by insurer and policy terms.

The outcome of surrendering your policy depends on timing. The surrender period is how long you must wait to withdraw your cash value without fees or penalties. This period varies by insurer.

• During the surrender period: Your insurer may refuse to give you the cash value or impose severe penalties if you cancel before this period ends.
• After the surrender period: You can withdraw your cash value and cancel without penalties. You may also be eligible for a refund based on your policy terms.

Know the surrender period timing to decide whether to cancel or keep your coverage. Canceling early often leads to substantial losses, while waiting until after the surrender period gives you more options. Term life insurance offers more flexibility since you can cancel anytime without financial penalties.

The cash surrender value is the money you receive when canceling whole life insurance or other permanent policies with cash value components.

How to calculate cash surrender value

Cash surrender value equals your remaining cash value minus surrender fees. Fees vary by insurer and how long you've had your policy. Your cash value builds over time as you pay premiums, with a portion going toward insurance costs and another portion invested by the insurance company. Most of your premium covers insurance costs and administrative fees early in your policy, so cash value accumulates slowly.

Surrender charges decrease over time, often disappearing entirely after 10 to 15 years, depending on your policy. These fees protect the insurance company from losses when policyholders cancel early, before the company recovers its upfront costs for underwriting and commissions. The exact surrender schedule appears in your policy documents, showing how fees decline each year.

Tax implications of cash surrender value

If your cash surrender amount exceeds what you've paid in premiums, you'll pay taxes. Contact a tax professional to understand potential tax consequences.

The taxable portion is considered ordinary income, not capital gains. Depending on the amount and your other income for the year, it could push you into a higher tax bracket.

Your life insurance free look period varies by state, ranging from 10 to 30 days after receiving your policy. During this window, you can cancel your life insurance and receive a full premium refund without penalties or surrender charges. Some states extend this protection to 45 days or longer for seniors over 65, recognizing they may need additional time to review complex policy terms with family members or financial advisors.

Most insurers start the countdown for your free look period when you receive your physical policy documents, not when you sign the application. Most states count calendar days rather than business days, so weekends and holidays are included in your timeframe.

To confirm your specific state's requirements, check with your state insurance department or review the free look disclosure statement that came with your policy. This protection exists because state regulators recognize that life insurance is a major financial commitment requiring careful consideration.

Consider your specific situation and think long-term before canceling. Depending on your policy type and timing, you might receive less than you've paid in premiums.

1. Start with your intent.

Considering canceling your life insurance policy can feel overwhelming. It's a significant financial decision that affects your family's future security. The key is to figure out your specific reasons and goals, so you can make the choice that's right for your situation.

2. Assess major life changes.
Ask yourself: Has my financial situation changed significantly? Common examples include job loss, divorce, children becoming financially independent, or paying off major debts.

• If yes: Move to Step 3.
• If no: Consider alternatives instead of canceling. Options may include policy loans, lowering your coverage amount or comparing new insurer rates.

3. Reevaluate coverage needs.
Determine whether your dependents still need financial protection. If their needs have decreased, your coverage requirements may be lower than when you first bought the policy.

4. Check insurability and cost.
Ask: Am I still insurable at affordable rates? Consider your current age, health changes, and whether you’ve taken on high-risk activities.

• If yes: Canceling may carry a lower risk, since you can likely secure new coverage in the future if needed.
• If no: Canceling may be a high-risk choice. Keeping the policy or reducing coverage may be safer than trying to replace it later.

Canceling a life insurance policy rarely guarantees you'll get your money back. But there are two exceptions:

• During the free look period: All policies include a free look period at the beginning, when you can cancel and get a full refund. This period length varies by insurer and state.
• Mid-billing cycle cancellation: If you cancel after the free look period but mid-billing cycle, you might get a prorated refund for the unused portion of that cycle only.

Cancellation rules vary by insurer. Before buying, ask your agent about their specific cancellation policy and refund possibilities.

The cancellation process depends on your policy type and timing.

Canceling term life insurance is straightforward: stop paying premiums and notify your insurer by letter, phone or online form. Canceling permanent policies like whole life insurance is more complex due to the cash value component. You may face surrender fees or other financial consequences.

Consider your reasons for canceling and consult a financial advisor, if needed, to make the best decision.

Learn more about canceling life insurance by reviewing our answers to common questions.

Canceling life insurance feels overwhelming when you're unsure about timing, penalties or whether you're making the right financial decision. We designed our analysis to help you understand the cancellation process clearly, so you can make the best decisions about your coverage without unnecessary stress or surprise fees.

We also ranked the best life insurance companies to help you find the right coverage if you're considering replacing your current policy or shopping for new financial protection.

How We Evaluated Life Insurance Companies

In our 2025 survey, we analyzed 248,399 life insurance quotes alongside customer satisfaction ratings, financial stability reports and product offerings to determine which companies handle policy changes and cancellations most effectively. We looked at companies that offer coverage nationwide and have online quote capabilities, ensuring our recommendations apply to most consumers.

Our scoring system evaluates three key areas:

• Affordability: 50%
• Customer Experience: 30%
• Coverage Options: 20%

Each company earns up to five points per category, which were weighted based on the above scoring system to create an overall MoneyGeek score out of 100 points.

Each company’s score incorporates the following:

• Cost data gathered through online quotes
• Financial strength ratings from AM Best and the number of years in business
• National Association of Insurance Commissioners (NAIC) customer complaint index data, J.D. Power customer satisfaction index ratings and other online customer reviews
• Availability of tools to aid in the buying process, such as online product materials and multiple payment options
• Diversity of life insurance products offered

Sample Customer Profile

MoneyGeek used this standard profile for quotes:

• 40-year-old male
• Nonsmoker
• 5 feet 9 inches tall and 160 pounds
• Average health rating

Premiums reflect this profile unless noted otherwise.

We modified the profile by age, gender, height, weight, tobacco use, health rating and location to collect quotes and determine the best companies for different customer types. We also gathered quotes for term life insurance with varying term lengths and coverage amounts.

We identified patterns in our data to calculate projections and extend our analysis beyond the initial quotes collected. This approach helped us understand how policy costs and company performance vary across different customer segments and coverage scenarios.

Coverage costs and company information were updated in 2025.