Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.

Before you cancel Life Insurance, read our guide to resolve some common issues.

When Should I Cancel My Life Insurance?

Life Insurance is one of the mot valuable insurance policies you can own.

It provides your family with financial aid in the event of your death, paying off outstanding debts whilst helping them to maintain their standard of living during such difficult times. Yet despite their value, there are times when you may need to review or cancel your Life Insurance policy.

The reasons for cancelling a policy span from the to being concerned about insufficient cover. Of course, being unable to afford Life Insurance is a very valid reason for wanting to cancel your policy. However, while your immediate financial responsibilities should come first, choosing to cancel something as important as Life Insurance is not a decision to be taken lightly.

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Why Cancel Life Insurance?

Sometimes, the biggest factor driving the cost of cancelling Life Insurance is the expense. Although Life Insurance typically costs just a few pounds a month, we understand that sometimes even such a small outlay can be too high if you’re strapped for cash.

The reality is, however, that saving money by cancelling your policy today could mean financial loss in the future. This could either be because you sadly pass away without cover or you find that getting covered again in the future is more expensive.

The Consequences of Cancelling Life Insurance Too Soon

Once you cancel life insurance policies, you might find that reapplying further down the line costs you a lot more than your old policy. This is because a new policy will be priced at the age you are when you take it out.

Also, the new policy will have to take into account any new medical conditions you’ve suffered since you cancelled your previous insurance.

why cancel life insurance?

That’s why it’s important to think the decision over carefully.

Below we’ve listed some of the most common reasons to cancel Life Insurance policies and given our insight to help you make an informed decision.

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Neil
Pensions

Victoria
Insurance
Having your life insurance cancelled won't necessarily improve your savings in the long term.

I Can’t Afford Life Insurance

Cost is one of the most influential deciding factors that leads to people to cancelling Life Insurance. While Life Insurance isn’t typically expensive, some people may think that it is an unnecessary expense. That’s why many people with money troubles consider having their life insurance cancelled to cut costs.

Before you cancel your policy, it may be a good idea to think carefully about what it is that your premiums buy you and whether the cost is worth the reward.

 

Don’t Underestimate the Risk of Passing Away

While may of us consider cancelling our Life Insurance due to cost, we may not be fully aware of just how high the risk of death is even for the average, healthy person.

In the table below, we’ve put together the risk of death in the next 15 years for a man aged 30, 40 and 50 to detail the level of risk you might face.

The Risk Of Passing Away
Age
The Risk

Age 30

1 in 47

Age 40

1 in 23

Age 50

1 in 10

Can Your Family Afford To Not Have Life Insurance?

Cancelling Life Insurance could mean that you leave your family without any financial support if you were to pass away.

If you are not immediately struggling to keep on top of your premiums, it may be worthwhile to keep up with your Life Insurance policy. That way, your family will always have some money to fall back on should you pass away.

If you feel that your premiums are too costly for comfort, there are other ways of saving money aside from cancelling your insurance.

 

Cut Costs or Cancel Your Policy?

There are some changes that you can make to your policy in order to reduce the cost of Life Insurance. This includes decreasing your policy’s payout if it’s more than you currently need (i.e. more than your current outstanding liabilities, such as a mortgage).

If you would prefer to find a cheaper policy with a different insurance provider, you should consider speaking to an insurance adviser with access to the whole market. They will be able to find you a better deal if there is one out there at the same time as make sure that you get equal value for your money with your new policy.

Samanatha Haffenden-Angear Independent Protection Expert at Drewberry

In the end, if you’re really finding it difficult to cover the cost of your premiums then it may be best to cancel your policy. However, Life Insurance is not usually an expensive protection product and offers considerable benefits for your loved ones.

Samanatha Haffenden-Angear
Independent Protection Expert at Drewberry

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Inheritance tax can have nasty consequences for your loved ones.

I’m Worried About Tax and Life Insurance

It’s more than reasonable to worry about tax biting a chunk out of your insurance payout and leaving your loved ones with a reduced payout. However, does the threat of taxation warrant cancelling Life Insurance policies entirely?

 

Inheritance Tax

Inheritance tax is something that everyone should think about if they plan on leaving anything to their children. However, according to our 2017 survey, 86.8% of working Brits who wanted to leave money to children hadn’t thought about inheritance tax at all.

By writing your life insurance in trust, you can ensure that your loved ones receive financial aid as soon as possible.

Inheritance tax in the UK is charged at 40% on all of your assets worth in excess of £325,000 for a single person. This can include your Life Insurance payout if you leave it to your children.

An insurance payout that becomes part of your estate in this way will need to go through probate before it can be given to the intended people, which can take as long as six months.

If the taxation of your Life Insurance payout concerns you, you can avoid having your insurance taxed and put through probate by writing your Life Insurance in trust.

If you choose to write your policy into trust, when you pass away your insurer will pay out into your trust rather than paying out directly to your estate. This ensures that your insurance payout stays outside of your estate for inheritance tax purposes.

By doing this you can avoid inheritance tax and ensure that your insurance policy’s payout reaches your loved ones a lot faster.

jonathan cooper, senior paraplanner at Drewberry, can offer inheritance tax advice

If you’re concerned about tax, try out our Inheritance Tax Calculator to see the effects it might have on your assets. Also, if you need inheritance tax advice you can also speak to our financial advisers.

Jonathan Cooper
Senior Paraplanner at Drewberry

 

Relevant Life Insurance

If you own a company, Relevant Life Insurance is a tax-efficient option for Life Cover. As this policy is effectively owned and paid for by the business, premiums are treated as a tax-deductible business expense. The payout is paid into a trust the company owns; the trust then distributes this to your loved ones. This avoids inheritance tax.

It’s typically possible to cover yourself and other employees for as much as 15 to 20 times their annual salary. In some cases where salary is minimal and the bulk of income is derived from dividends you can insure yourself for an arbitrary figure.

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The payout rates for life insurance providers might be a lot higher than you think...

I’m Worried That My Insurer Won’t Pay Out

Many people are understandably worried that their insurance claim might be declined. This is especially true when it comes to Life Insurance, as we won’t be around to fight our case and it will be left to our families to do so.

In our Drewberry 2018 Protection Survey, we asked 3,000 people what percentage of claims the top UK insurers pay. The median answer of the group was that insurers pay out for only 43% of Life Insurance claims.

The real statistics for Life Insurance Claims Payout Rates, however, are very different from what people usually think they are.

Jake Mills Independent Protection Expert at Drewberry

Despite what people think, it is actually quite rare for Life Insurance claims to be declined in the UK. This is because Life Cover policies typically have very few exclusions and cover most causes of death. As long as you follow the correct procedure to make a claim and were truthful when applying for your policy, it is not very likely that your claim will be declined.

Jake Mills
Independent Protection Expert at Drewberry

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Insurer Claims Statistics

 

When choosing our personal protection we want to know it is going to pay out when we need it to.

By choosing a product or specific insurer from the menu below you will be able to view the claims payout rates for all of the main UK insurers for income protection, life insurance and critical illness insurance.

Insurer
2015
Percentage of Successful Claims
2016
Percentage of Successful Claims
2017
Percentage of Successful Claims
Critical Illness Insurance
Zurich
92%
90%
95%
Aegon
97%
95%
94%
Aviva
92.5%
92.3%
93.2%
AIG
91.4%
92.3%
93%
Legal & General
91.5%
92.6%
92%
Vitality Life
-
-
92%
Royal London
93%
92.2%
91.2%
Liverpool Victoria
91%
90%
88%
Friends Life
93%
-
-
Income Protection
Aegon
85%
85%
96%
Liverpool Victoria
92%
90%
96%
Vitality Life
-
94%
96%
Holloway Friendly
96.9%
98%
96%
Shepherds Friendly
97.6%
97%
96%
Legal & General
95%
94.4%
95%
Cirencester Friendly
94%
94%
94.7%
British Friendly
97.8%
97%
92.4%
Royal London
94%
95.6%
92.1%
Exeter
94%
94%
91%
Aviva
92.4%
92.6%
88.8%
Zurich
87%
85%
87%
Friends Life
84%
-
-
Life Insurance
Zurich
98.5%
98%
99%
Vitality Life
99%
99%
99%
AIG
92.2%
95%
99%
Scottish Widows
98.9%
99.4%
98.99%
Aviva
98.9%
98.9%
98.9%
Legal & General
97.9%
98.6%
98%
Aegon
98%
98%
98%
Royal London
98%
96.8%
97.3%
Liverpool Victoria
97%
98%
95%
Friends Life
99%
-
-
If you find that your life insurance policy is no longer relevant to your lifestyle, then you may need to look into having it adjusted.

My Circumstances Have Changed – Do I Still Need Life Insurance?

It’s very likely that your situation has changed somewhat since you first took out your insurance policy. In some instances, these changes are so drastic that your policy might no longer be relevant to your lifestyle. That’s when you might need to change or even cancel Life Insurance policies.

 

Getting Divorced

If you purchased a Joint Life Insurance policy with your spouse, getting divorced can bring on some complex issues.

Keeping a joint life insurance policy can become complicated if you divorce and both start separate families

If you are no longer married to the person you own a joint life policy with, the payout will be subject to inheritance tax. It can also become an issue that a joint policy will only pay out once upon the first death.

For these reasons and more, it would usually be better to have two single policies instead of a joint policy that is shared with an ex-partner.

However, it isn’t always necessary to cancel your joint policy and purchase two new single policies. Some insurers will allow you to split a joint life policy into two single policies under certain conditions.

ask rauri taylor, independent protection expert at drewberry, for life insurance advice

It’s important that you read your policy wording carefully to find out whether your insurer will allow you to split it into two policies. If you need help splitting a joint policy or finding a new single Life Insurance policy, speak to our insurance experts.

Rauri Taylor
Independent Protection Expert at Drewberry

 

Moving Home

If you have a Mortgage Life Insurance policy and decide to move home, taking on a larger mortgage, you may find that your policy no longer covers your loan.

However, cancelling Life Insurance policies is not always necessary when you take out a new mortgage.

Most insurers will allow you to increase your cover or extend the term on your Mortgage Life Insurance if you move home and take on a larger mortgage, although this usually affects the cost of your policy.

 

Will My Life Insurance Cover Me if I Move Abroad?

Moving abroad will complicate any insurance policy that you took out in the UK and most insurers have different terms when it comes to keeping you insured while you’re in another country.

Some insurers will allow you to keep your insurance policy if you still own a UK property and have a UK  bank account. Other insurers will keep you insured for a certain length of time while you are abroad and if you exceed this or move abroad permanently, your insurer will terminate your policy.

Sam Barr-Worsfold Independent Protection Expert at Drewberry

Even if your insurance provider allows you to keep your policy while you’re abroad, they may change the cost of your policy.

This is because your lifestyle will change when you move abroad. A different job, different hobbies and a different home can all affect the cost of your premiums. In which case, it may be more cost effective to cancel your policy and take out a new one once you’re abroad if you plan to move overseas permanently.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

 

Leaving Your Job

Even if you are not earning money, it’s likely that you’re still contributing to your household and your efforts would be greatly missed if you were to pass away. Someone not earning an income, such as a stay-at-home parent, could benefit from having Life Insurance.

In a family, the surviving partner may have to take over the deceased partner’s household duties, which can include taking care of children and cleaning the home. A Life Insurance payout can be a great help in this scenario because the remaining partner can use the money to pay for childcare etc. while they remained in work to support the family.

With Family Income Benefit, your family will receive your policy’s payout as monthly benefits rather than a lump-sum in order to make the benefit more manageable.

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Oliver did an excellent job in making the right recommendations. He's been very patient in dealing with my request and helping me choose the right product. Well done and thanks very much!

Jayant Rampuria
06/10/2018
 

Should I Cancel My Life Insurance if I No Longer Need It?

 

I Have Paid off My Mortgage

If you have paid off your mortgage, it may feel somewhat pointless to keep paying for Life Insurance. But, if you’ve chosen Level Life Insurance and your term extends beyond that of your mortgage, it may make sense to keep up the payments so you can have a lump sum to leave beneficiaries.

Decreasing Term Mortgage Insurance falls alongside your mortgage, reaching zero along with your mortgage at the end of the policy’s term. Here the policy ends automatically without you having to cancel it, but if you still needed cover afterwards then it might be very expensive to secure.

 

I Don’t Have Any Beneficiaries

Perhaps your children have grown up and become financially independent, or maybe you don’t have any children and your partner passed away. If you don’t have any people to which you want to leave some money, then it may not be necessary to keep a Life Insurance policy.

If you're living alone with no dependants, cancelling your life insurance policy won't be a serious issue.

There are some reasons why you may consider keeping your policy, however. Even if you don’t have anyone to leave the payout too, there are other ways in which you can use your Life Insurance policy.

Most Life Insurance policies automatically come with Terminal Illness Benefit, which allows you to claim your insurance payout early if you have a terminal illness.

This benefit can be useful to provide financial support if you become seriously ill, perhaps paying for end of life care etc.

Critical Illness Cover or Income Protection are more comprehensive forms of sickness insurance, and you should never rely on a Life Insurance terminal illness benefit to provide you with sick pay cover as it’s a very narrow benefit. However, it could still come in useful if you are diagnosed as terminally ill.

Samantha Haffenden-Angear, Independent Protection Expert at Drewberry

Even if you don’t have beneficiaries, there are still ways in which your insurance payout can be used. Many people use their Life Insurance to cover their funeral costs while others might have it given as a donation to a charity of their choosing.

Samantha Haffenden-Angear
Independent Protection Expert at Drewberry

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Robert
Income Protection
If you cancel a life insurance policy with combined cover, you miss out on even more protection.

Should I Cancel Life Insurance With Critical Illness Cover?

Critical Illness Cover is a type of cover that you can add on to your Life Insurance policy which will cover you for serious illnesses. While it’s useful to have extra cover, paying extra for this kind of add-on might not be the best way to go about increasing your protection.

 

What Is Wrong With Critical Illness Cover?

While Critical Illness Insurance can be a valuable protection product, Life Insurance with Critical Illness Cover has its flaws. This is because, while you are covered for both death and illness, your policy will only pay out once.

Life Insurance with Critical Illness Cover will only payout once, which is not suitable for everyone's situation.

If you are ill and claim for critical illness, your insurance policy will terminate, which means that you won’t have any Life Insurance.

Instead, it might be wise to consider having your Critical Illness Cover and Life Insurance in two separate policies.

By doing this you can get a payout from both policies if you need them and claiming for a critical illness won’t stop your life cover.

Usually, insurers will let you stop your Critical Illness Cover without having your Life Insurance cancelled. However, you should speak to an adviser first to find out your options if you want to separate your combined policy.

 

Is Income Protection A Better Alternative?

If you are looking for an insurance that will cover illnesses and injuries to replace your Critical Illness Cover, you might consider Income Protection.

More people have CIC policies than Income Protection, even though Income Protection covers more causes of incapacity. IP also pays out monthly rather than paying out a lump sum, making it easier to manage your expenses while you’re ill.

With Income Protection and Life Insurance, you will have comprehensive cover that will protect you and your loved ones against injury, illness and death.

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I’ve Found a Better Policy – Should I Have My Old Life Insurance Cancelled?

Switching to a brand new policy comes with its risks and you don’t always know what you’re in for when you come across a promising policy. Instead of rushing to cancel your current policy and switch to a new one, you should think carefully and compare what you have to what you want.

 

I Found a Cheap Life Insurance Quote Online and Want to Switch

You should always take Life Insurance quotes that you find online with a pinch of salt. They may not always be accurate, especially if you didn’t have to submit any personal information in order to get the quote.

Quote calculators can get you started on your search, but accurate quotes are found by speaking to an insurer or adviser.

Before you rush into cancelling your policy and purchasing a new one, you may want to speak to a financial adviser.

They will be able to confirm whether or not the quote you found was accurate and get you a personal quote directly from the insurer.

They will also be able to tell you more about the insurer your want to switch to: whether they’re reliable, their claims payout rate, and the quality of their insurance policies.

With a financial adviser’s expert insight, you don’t have to worry about getting duped by misleading quotes online. If you’re interested in switching Life Insurance providers or would like to look into cheaper options, speak to a financial adviser first.

 

My Employer Has Offered Me A Place on a Group Life Insurance Scheme

A Group Life Insurance scheme is a great employee benefit to have, especially because it’s usually employers that pay for your cover. However, it may not be the best idea to cancel your existing Life Insurance policy simply because you’ve got group cover.

A group Life policy is a great benefit to give your family increased financial support, but it should not be your only protection.

One issue that you may come across with a Group Life policy is that the payout usually covers a maximum of 3 to 4 times your yearly salary. If this is the only Life Cover you have, it may not be enough to meet liabilities such as a mortgage while also leaving cash free for beneficiaries.

Another issue with a Group Life policy is that you are only covered while you are an employee of the company who owns the policy. If you do not have a Life Insurance policy aside from the group policy, you won’t have any life cover if you leave the company.

Having a Group Life Insurance policy may mean, however, that you can reduce the level of cover from your individual policy so that the two added together come up with the total amount of protection you require.

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Speak to an insurance adviser today about cancelling your life insurance.

Ask a Financial Adviser About Cancelling Life Insurance

Cancelling Life Insurance is a big decision – one you may regret later on if you change your mind. The later you leave purchasing Life Insurance, the more expensive it becomes due to age and deteriorating health.

If you cancel your old policy, you might find yourself unable to buy another policy later on with the same level of cover for the same cost, so be careful and don’t be too hasty when it comes to cancelling your insurance.

For whatever reason you might want to have your Life Insurance cancelled, consider speaking to a financial adviser beforehand. They may be able to help you find a more affordable alternative or show you more options to make your policy better suited to your circumstances.

Matteo Mockler, Health & Wellbeing Expert at Drewberry

If your reason for cancelling Life Insurance isn’t on this list, get in touch with our insurance advisers on 📞 01273646484 for valuable Life Insurance Advice.

Our advisers can tell you about your options and help you find the right insurer and policy to replace or modify any policy you would like to cancel.

Matteo Mockler
Health & Wellbeing Expert at Drewberry

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Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Level of Cover
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

Frequently Asked Life Insurance Questions

 
I’m looking into obtaining Life Insurance so my family have enough to get by on should the worst...
 
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Bronja Whitlock was absolutely brilliant, as my mind isn’t in the right place at the moment due to the loss of my partner and I forgot who my insurers were or if I was covered. I therefore contacted her from an old email that I had from a few years just explaining my situation. I wasn’t expecting a response to be honest, but Bronja replied back the same day. She didn’t just reply with the most empathising response, but she also contacted the insurance company and told them of my situation and ordered my claim pack on my behalf, which I can’t appreciate enough. Bronja Whitlock you are an asset to your company. Thank you.
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