Top 5 Reasons Why Not To Cancel Your Life Insurance Policy

Twice this week I sat with good clients who were torn about keeping or surrendering their life insurance policies because of the economy. They worry about how to pay their bills on time, such as their mortgage or car note. 

Unfortunately, often times they do not strategize well.  Instead of eliminating vices (e.g., cable TV, alcohol, cigarettes and gambling) from their budget, they eliminate necessities that they do not use on a daily basis, such as life insurance.  They are not going to eliminate soap and deodorant from their budget, for individuals use soap and deodorant on a daily basis. However, they will drop their life insurance policies.

The rational for canceling their life insurance, especially when they are financially struggling, range far and wide.  Here are a list of some of the excuses that I've heard:

• I have enough life insurance through my job ($50,000 probably won’t pay off your mortgage)
• I will pick it back up when my finances improve
• My kids are grown; my spouse will still be working
• I am in good health; things should not change over the next year
• I have enough money in my bank account to bury me.

Here are several key factors to consider before making a decision to discontinue your life insurance coverage.

Drop Your Life Insurance Policy - Loose Your Rate 
Life insurance premium rates are based on a number of factors including age.  If you cancel your life insurance coverage then decide to repurchase later, you will likely need to pay more for a like amount of coverage.

You're Healthy Now... That Doesn't Mean You'll Be Healthy Later
Your health status, much like your age, is a key factor in determining  life insurance premiums and supplemental coverage at a similar cost.  Today, you may be healthy. Tomorrow, you may be diagnosed with a critical illness, cancer, heart conditions or diabetes.  If that happens your premium cost could likely increase substantially or you man not be able to get coverage at all.

Employer Group Life Insurance Plans Often Change
If your life insurance policy was purchased through your employer, remember that employer benefit plans often change and life insurance policies can be impacted.  If you drop and existing  insurance policy and your employer subsequently changes or reduces benefits, you might not be able to purchase life insurance through your company.  Not to mention, if you should loose your job or decide to leave your job you would loose you group life insurance coverage as well.

Don't Think Fast Cash - Life Insurance Plans Can Offer Income or Mortgage Protection
If you purchased a family income policy and you die, your family will receive monthly income for a period of time to make up for lost wages.  This type of shorter- term supplemental insurance can help a family get back on its feet in the event the breadwinner's income is lost due to a death.  Likewise, if you purchased mortgage insurance and you die, your mortgage is paid off.

Expect the Unexpected
Remember the reasons you selected life insurance and supplemental insurance coverage in the first place.  Generally people select these policies to help financially protect their loved ones.  Think about the impact on those left behind if your life insurance policy is dropped.


If you feel that you can't afford the life insurance premiums, call your insurance company. Many companies will allow you to reduce the face amount in order to keep a smaller amount of coverage at a reduced price.  At the very least call your life insurance agent or your financial advisor.


If you have questions about your life insurance policy.  We can help.

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