Insurers can cancel your life insurance only in limited circumstances. Find out the reasons and how to avoid them.
Updated Aug 30, 2023 · 1 min read Written by Barbara Marquand Senior Writer Barbara MarquandBarbara Marquand is a former NerdWallet writer covering mortgages, homebuying and homeownership, insurance and investing. Previously, she covered personal finance for QuinStreet and wrote for national consumer and trade publications on topics including business, careers and parenting. Her work has appeared in MarketWatch, MSN Money, The New York Times and The Washington Post.
Reviewed by Tony Steuer Life insurance expert Tony Steuer
Life insurance expert | Life Insurance
Tony Steuer is a financial wellness advocate, podcaster and speaker, and the author of "Questions and Answers on Life Insurance." His advice has been featured in media outlets including The New York Times, The Washington Post, Fast Company, Forbes and CNBC. He has a bachelor of science degree in finance from California State University and holds the following designations: Chartered Life Underwriter (CLU), Life and Disability Insurance Analyst (LA) and Certified Personal and Family Finance Educator (CPFFE).
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Assigning Editor Lisa GreenLisa Green leads the life insurance team and oversees insurance-focused data journalism at NerdWallet. A professional journalist since high school, she was an insurance writer at NerdWallet before becoming an assigning editor. Previously, Lisa spent more than 20 years as an editor at The Tennessean in Nashville, where she led business and consumer coverage for several years. At The Tennessean, she was part of a 2011 Pulitzer Prize finalist team for coverage of devastating floods in Middle Tennessee. Her work has also won awards from the Society for Advancing Business Editing and Writing, Investigative Reporters and Editors, and the Society of Professional Journalists. Lisa is an alumna of the Wharton Seminars for Business Journalists at the University of Pennsylvania. She has also studied data journalism with the National Institute for Computer-Assisted Reporting, business editing with the American Press Institute and writing, editing and news research with the Poynter Institute. In addition to her work at NerdWallet, Lisa is a real estate investor and has taught a seminar on how to earn college scholarships. She is based in Nashville.
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You can cancel your life insurance policy at any time — not that you should. But a life insurance company can cancel a policy only if you:
Stop paying premiums. Commit life insurance fraud when applying for the policy.Here’s a look at both scenarios and how to avoid them.
After a payment deadline passes, life insurance customers get a grace period, usually 30 to 60 days, depending on the state where you live. The life insurance company will send a late-payment notification. As long as you pay during the grace period, the coverage stays intact.
But once the grace period passes, the life insurer can cancel the policy. You can ask to have it reinstated, but act quickly. The longer the coverage has lapsed, the more likely the insurer will ask for new health information or require another medical exam.
Here are tips for avoiding cancellation for nonpayment:
Set up automatic payments from a bank account or credit card.Ask a trusted friend or relative to serve as backup. Fill out a form provided by the insurer to designate someone to receive late-payment notices. The company will send notices to the policy owner and the designated person.
Set up a recurring reminder in your calendar, allowing enough time to submit the premium.The insurance company must receive the premium by the end of the grace period, so if you are close to the end of the grace period, consider paying online, sending your premium by overnight mail or calling the insurance company and paying over the phone if you can.
Lying on a life insurance application can have terrible consequences. If the insurer doesn’t discover the truth during the application process, it could cancel the policy during the contestability period, which is typically the first year or two of the policy.
Cancellation isn’t the only concern. A life insurance company could refuse to pay the claim if it discovered fraud after the insured person died. The life insurance contestability period gives companies the right to investigate claims and dispute them if it learns that the applicant purposely lied. Insurers don’t investigate every claim, and they still pay legitimate claims during the contestability period.
As long as you’re truthful on the application and pay the premiums on time, the coverage continues for as long as the policy dictates. Term life insurance expires at the end of the term, with no payout if the insured person is still alive. Permanent life insurance , such as whole life, ends and pays out when the insured person dies or the policy matures.
Life insurance companies can’t cancel policies if you:
Start an unhealthy habit like smoking after buying the policy. Buy other life insurance.Group life insurance is coverage made available through an employer. The employer owns the coverage and can decide to stop offering it. Or the coverage likely ends when you leave the company. You might have the chance to continue it if you pay for it. Ask the employee benefits department at work for details.
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Barbara Marquand is a former NerdWallet writer covering mortgages, homebuying and homeownership. See full bio.
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