There are times in our lives that things come up and we have no way of knowing that they would. In most cases there are financial considerations and some of the bills or responsibilities that we have must take a back seat to the current issue. This is the case when many people will seek to cancel the life insurance policy that they have in order to ease the burden of the monthly bill until such a time when they can renew the policy. The issue of whether or not there will be a penalty for the cancellation and a loss of money is dependent on the life insurance company that has written the policy for you.
Canceling a life insurance policy can be a life changing event. The fact that you are not covered in case something happens to you can be very scary but the issue is that you are not in the position to pay the price for the policy at this point. So you are faced with the dilemma that you need to cancel the policy and receive a refund. This is where it can get a bit tricky and maybe even a little upsetting. The point is that you need to be clear on the stipulations for such things when you’re buying term insurance because there is the chance that you may be surprised to find out what the company has to say.
In many cases the life insurance company will allow the policy to be cancelled. When this happens though they will normally charge a fee or a penalty for the early termination of the policy. Depending on the company this can be small or rather large. It all has to do with the clause that was built into the policy when you made the purchase. In most cases there is a standard fee or percentage that is charged that does not change. So any money that you are due when the policy is cancelled will have this fee deducted before the refund is issued.
One of the newer clauses that are built into the life insurance policies is the decreasing fee structure for the early cancellation. With this clause the amount of the fee is continually decreasing as the number of years that the policy is kept active increases. So the longer you have the policy the lower the penalty for having to cancel. There is still the matter of how much the fee is. When the policy first starts the fee is very high and prohibitive of canceling in the beginning. This is in place to help protect the company from any kind of fraud.
There are life insurance companies that offer no fee for early cancellation. This is something that will be built in to the policy from the beginning but it can mean that you will pay more for the policy. Compare life insurance quotes and buy term insurance now.