How to Withdraw Insurance Policy?

In today's fast-paced world, everything is digital. This also includes insurance, related to which many tasks can now be completed online. Cancelling a term life insurance policy is no exception. Your life circumstances and financial needs can change over time, making it necessary to cancel your policy. While the process may seem daunting, the right information and guidance can make the process hassle-free. 

Cancelling term insurance is generally easier than cancelling whole life insurance. However, while you can cancel your policy at any time, the main concern is whether you'll get your money back.

Reasons to Cancel Term Insurance Policy

Your finances change over your life. Sometimes, it makes sense to cancel a life insurance policy.

• Dissatisfaction with Policy or Provider — If your provider has poor service or high premiums, consider shopping for a better life insurance provider.
• Change in Financial Situation — If you lose your job, get divorced, or face financial hardship, you might not be able to afford your life insurance policy. Cancelling due to financial hardship is a valid reason.
• Better Investment Options — You may find better long-term savings options than your whole life policy. A financial advisor can help you decide if switching to an annuity, mutual fund, or other investments is better.
• Policy No Longer Needed — Term coverage is crucial when your death would heavily impact dependents. Once major obligations like a mortgage or college are covered, you might not need the same level of coverage for your family.

How to Cancel Term Insurance Policy?

The process of cancelling your life insurance policy varies as per the type of policy you have. Generally, terminating term insurance is much easier than whole life insurance. However, as we saw earlier, although you can cancel your life insurance policy at any time, whether you get any money back depends on when you cancel.

Cancellation During Free Look Period

During the free look period, which lasts 10 to 30 days after your plan is issued, you can cancel your policy for a full refund.

How to Cancel Term Life Insurance?

• Stop Paying Premiums: If you miss a payment and don't pay within the 30-31-day grace period, your insurance will be terminated.
• Send a Letter: Inform your insurer in writing that you want to cancel your coverage.
• Contact the Service Provider: Many insurers allow you to cancel over the phone. In this case, a representative can guide you through the process. Note that there are no fees or penalties for cancelling term life insurance.

What Happens If You Cancel Insurance Policy?

Cancelling a life insurance policy leaves your beneficiaries without financial protection if you pass away. So while you might have other assets to support them, it's important to consider your overall financial and estate plan before making this decision.

If your beneficiaries agree, they can take over premium payments either directly to you or by being added as a payer with the insurance company. Always discuss your options before cancelling or inform everyone afterwards to avoid surprises.

If you're struggling with premium payments, consider asking your insurance company for a lower coverage amount that suits your budget. 

💡Cancelling a term policy is straightforward, but whole-life policies may have surrender fees.

Can You Get an Insurance Policy Refund?

You can get an insurance policy refund upon cancellation if you cancel it during the free-look period. Another way to get an insurance cancellation refund is to opt for an additional rider — return of premium. It’s important to note that most insurance providers don’t offer this add-on in the UAE. Moreover, if you end up getting this rider, the insurance costs will increase. 

Cancellation or Selling: What to Do?

If you want to recover some of the insurance costs, you can opt to sell your term insurance plan instead of cancellation. This can be done in 2 ways — vertical settlement and life insurance settlement. 

Certain situations may lead you to cancel your term life insurance, which is quite common. However, remember that without an add-on rider (like a return of premium) or being in the grace period, you won’t get a refund on your premiums.

You can sell your policy to recover some premium costs, but the insurance company typically allows this only if you’re diagnosed with a terminal illness. Alternatively, you can convert your term plan into whole life insurance to gain cash value and death benefits.

Consult an insurance professional before cancelling your policy as doing so can leave you without life protection.