Can Life Insurance be Cancelled Without Penalty?
Life is full of unexpected situations. For instance, sudden financial difficulties such as piled bills or unexpected payments might lead you to cut expenses in different areas. During tough financial periods, insurance payments might take the back seat. Thus, many people opt for temporary canceling their life insurance policy to relieve the monetary burden, thinking on reinstalling the policy later on when things get better. However, it is necessary to know whether canceling the policy can lead to any penalty or money loss. Make sure you get to know the clauses well.
Now, canceling the policy can be a big event in your life. At times it might seem scary that you are no more insured after you cancel the policy. However, if you finally plan to cancel the policy and are wondering whether you will receive the refund, check with the life insurance company first. Such a situation is however both upsetting and tricky. Thus, when you buy the life insurance you must be clear about the terms and conditions. This is necessary since you might later on be surprised by the fine print and special conditions.
However, if you decide to go ahead and cancel the policy early, the insurance company will probably charge a fee. The sum of the penalty (large or small) however depends on the company. Companies are going to apply their own termination fees and conditions. In the majority of cases however, termination fees are standard and does not generally change. When the policy is canceled, you are due to receive some of the money put aside in a fund. Before the refund is issued however, early termination fees are deducted.
Life insurance policies cancellation fees vary over time. The initial cancellation fee is high, but as the policy stays active for years, the fee decreases continually. Thus, the longer you keep the policy until you cancel it the lower will be your penalty. This fee is pretty high when the policy starts and you cannot cancel the policy in the beginning. Such a clause helps to decrease the cases of fraud. You must check with the insurance company however to know more.
Nevertheless, some life insurance companies do not charge any early termination fee. These types of fee are not implemented in the middle of the policy; it is there when you purchased it. Therefore, you must ask the company about this specifics clause. The more you are informed the more you save.
Read the terms carefully before you seal your signature on the coverage papers.