When Should I Cancel My Life Insurance?

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Why Cancel Life Insurance?

Life Insurance is designed to provide your family with financial aid in the event of your death, including paying off outstanding debts whilst helping them to maintain their standard of living.

Yet despite the value of such protection, there are times when you may need to review or cancel your Life Insurance policy.

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 because of your increased age and any medical conditions you may have suffered in the interim.

Don’t Underestimate the Risk of Passing Away

When trying to work out whether you should cancel your Life Insurance, it’s worth ensuring you’re going in with all the facts.

This includes looking at the risk of death in the coming years, even as a totally healthy individual.

In the table below, we’ve laid out the chances of passing away in the next 15 years for a healthy non-smoking man aged 30, 40 and 50.

The Risk of Passing Away


The Risk


1 in 47


1 in 23


1 in 10

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Top Reasons to Cancel Your Life Insurance...

  • 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 outgoing. That’s why many people with money troubles consider having their policy cancelled to cut costs.

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

    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 cover.

    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.

    This is especially the case if you’ve had the insurance policy for a while and are older than you were when you took it out, or if you’ve suffered any medical conditions since taking out the policy.

    Age and medical history will be major factors in deciding the price of a new policy, so it may be that moving to another provider doesn’t save you money at all when all’s said and done.

    samatha 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

  • 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.

    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 considerable time to clear.

    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.

    Relevant Life Insurance

    If you own your own limited 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.

    Michael BarrowIndependent Protection Expert at Drewberry

    If you want to opt for the Relevant Life Insurance route, be aware that it’s more complicated than a personal policy. As the business is paying for it, you want to make sure it’s all set up correctly and squared off with HMRC. An adviser is best-placed to help with this.

    Michael Barrow
    Independent Protection Expert at Drewberry

  • 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.

    Life Insurance claims are paid around 99% of the time; the main reason for claims being declined is a lack of disclosure at the application stage.

    A Life Insurance application will involve an extensive medical questionnaire that we’ll help you fill in. It’s vital you disclose anything that might impact the policy. If you don’t, there’s a risk the insurance may not pay out when you need it the most.

  • 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.

    In such situations, you might need to change or even cancel Life Insurance policies to ensure they keep up with your new circumstances.

    Getting Divorced

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

    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. Furthermore, you may no longer own the marital home with a mortgage to protect.

    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.

    Sam Barr-WorsfoldIndependent Protection Expert at Drewberry

    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.

    Sam Barr-Worsfold
    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.

    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 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.

  • 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.

    However, 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.

    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 Life Insurance in place.

    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 terminally 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.

    samatha 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 it to cover their funeral costs while others might give it as a donation to a charity of their choosing.

    Samantha Haffenden-Angear
    Independent Protection Expert at Drewberry

  • My Employer Has Offered Me a Place on a Group Scheme

    A Group Life Insurance scheme is a great employee benefit to have, especially because it’s 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.

    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 for beneficiaries to maintain their lifestyle.

    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, at which point getting personal cover could become very expensive due to your advanced age.

    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.

  • I've Found a Better Policy Online

    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.

    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 to ensure like-for-like cover is maintained.

    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.

    Michael BarrowIndependent Protection Expert at Drewberry

    If you’re interested in switching Life Insurance providers or would like to look into cheaper options, speak to a financial adviser

    Michael Barrow
    Independent Protection Expert at Drewberry

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Should I Cancel Life Insurance With Critical Illness Cover?

Critical Illness Insurance is a type of cover that you can add on to your Life Insurance policy which will cover you for serious illnesses.

While having extra cover can be useful, it may not always be the best way to achieve your protection goals.

While Critical Illness Insurance can be a valuable protection product, Life Insurance with Critical Illness Cover has its flaws.

For instance, if you are ill and meet the definition to claim 100% of the sum assured, in most cases the policy will terminate, which means 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.

Income Protection also pays out monthly rather than paying out a lump sum, which can make 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.

Ask an Expert 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.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 2702 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Tom Conner Director at Drewberry

If your reason for cancelling Life Insurance isn’t on this list, get in touch with our insurance advisers on 02084327333.

We can discuss your options and help you find the right insurer and policy to replace your policy, or modify any policy you would like to cancel, completely fee-free.

Tom Conner
Director at Drewberry

Josh was brilliant, very quick process, simple, regular updates and reliable. Would highly recommend.

Lisa Stanway
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