When Can You Drop Your Term Life Insurance?
Sep 10, 2023
Jamie Fleischner

Jamie Fleischner

10 Sep, 2023
The decision to drop or cancel your term life insurance policy depends on your individual financial and insurance needs. Here are some common scenarios when you might consider dropping your term life insurance:
  1. The term has expired: Term life insurance policies have a specific term, typically ranging from 10 to 30 years. If your policy has reached its expiration date and you no longer have a need for life insurance coverage, you can let it lapse. It is important to contact your agent and broker to request to cancel the policy. Some policies will automatically renew at a significantly higher price if you are on an automatic bank draft and don’t request to cancel.
  2. Your financial situation has improved: If your financial situation has improved significantly since you purchased the policy, and you have enough assets to cover your financial responsibilities and support your loved ones in case of your passing, you may no longer need the coverage.
  3. Your dependents are financially independent: If your children or other dependents have become financially self-sufficient, and your spouse or other beneficiaries no longer rely on your income for support, you might not need as much coverage or any at all.
  4. You’ve paid off major debts: If you’ve paid off your mortgage, student loans, and other significant debts, your financial obligations may have decreased, reducing the need for a large life insurance policy.
  5. You’ve accumulated substantial savings and investments: If you have substantial savings, investments, and retirement accounts that can provide financial security for your loved ones in the event of your passing, you may not need as much life insurance coverage.
  6. Premiums are becoming unaffordable: If you’re struggling to keep up with premium payments and the cost of maintaining the policy is becoming a financial burden, you may consider canceling it.
  7. You have a new policy in place: If you’ve purchased a new life insurance policy that better aligns with your current needs and circumstances, you may decide to cancel the old one. Just make sure the new policy is active and covers your needs before canceling the old one.

Before dropping your term life insurance policy, it’s important to carefully evaluate your current financial situation, long-term goals, and insurance needs. Consider discussing your decision with a financial advisor or insurance professional to ensure you’re making the right choice for your individual circumstances. Additionally, be aware that if you cancel your term life insurance policy, you won’t receive any refunds for the premiums you’ve paid, and you’ll lose the coverage provided by that policy.

Once you cancel your policy, you will need to undergo new medical underwriting to purchase any future benefits. Therefore, if you have an adverse change in health, think carefully before dropping your coverage.

For more information about life insurance or evaluating your coverage, contact Set for Life Insurance today!

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