If I cancel my Life Insurance Policy do I get anything in return?

If I cancel my life insurance policy will I get anything in return? Does a whole life insurance policy or term life insurance policy pay back my premiums?
asked Dec 14, 2012 in Insurance by answernest

1 Answer

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It depends on the type of life insurance you have. If you have term life insurance and you cancel the policy, you won’t get anything in return. You will have paid premiums over the years but the way term insurance works, you will not have built up any sort of cash value as with some other types of life insurance.
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On the other hand, if you have a whole life insurance policy with a cash value component , you will build up a cash value as you pay your premiums. As time goes by, the cash value grows tax deferred. You can take out loans against this cash value or surrender the policy and get the cash out. When you cancel a cash value insurance policy, you may have to pay a surrender fee in order to get the cash.

If you have already taken out loans against the cash value and haven’t repaid them at the time of cancellation, you might not get anything in return because you’ve already taken out the cash. In addition, you may have tax consequences to consider in this situation.

answered Dec 14, 2012 by answernest