FREQUENTLY ASKED QUESTIONS

You may be able to get a refund, or a partial refund when you cancel your life insurance policy.  Depending upon your type of policy, you may also get a payout of the cash value in your policy.

A life insurance policy is a wise investment, but it’s also a financial commitment. In exchange for providing your loved ones with financial protection when you pass away, you are required to pay your life insurance provider a pre-determined amount of money. This amount of money is known as a premium, and you must pay it every month in order for your life insurance to be effective. In other words, if you fail to pay it and you pass away, your coverage will end and the life insurance provider will deny your beneficiary’s claim.

With all of that said, the cost of life insurance can certainly add up, especially considering the fact that most policies are effective for a period of 30 years or more. If you have been paying your premiums on your policy but you decide to cancel your coverage, you may be wondering if you can get a refund. If you have purchased a return of premium term life insurance policy, purchasing a policy that offers permanent coverage, or by selling your policy, you can receive a refund. However, there are advantages and disadvantages to these options. Keep on reading to learn more.

How Can You Receive a Refund for a Term Life Insurance Policy?

If you have purchased a term life insurance policy with a return of premium, you can receive a refund for your premiums. This type of policy is just what the name suggests: when the term of the policy is up, your insurance provider will return your premiums to you.

Typically, you will receive the entire sum of the premiums you have paid, and that money will not be taxed; however, any fees or the cost of any additional riders that were added to the policy may not be returned. Also, the cost of this type of policy is usually higher than a standard term policy, and that’s understandable. Since your insurance provider will be returning the premiums when the term expires, they will charge more for premiums; typically, the cost is about 30 percent more than a standard term policy.

Most term life insurance policies do not have a return of premium component.  If you have a traditional term life insurance policy, you won’t be refunded your premiums when the coverage period has ended.

What if you End Coverage Early?

There is one possible time when you get a small refund on a term life insurance policy, and it is if you have pre-paid for the coming year.  If you cancel before the end of the period that you have pre-paid for, you may get a pro-rated refund.  For instance, if you are at the start of the 6th month of the policy year, and you paid for the whole year, your life insurance company may be willing to refund you 50% of your annual premium.  More often, having pre-paid, someone will choose to let their coverage extend until the end of the period the payment covered.

What About a Whole Life Insurance Policy?

If you are interested in receiving a refund for the premiums you have paid on your life insurance after you cancel the policy, you can also purchase a whole life, or permanent life insurance policy, with a cash value feature.

The cash value feature of a whole life insurance policy increases over the span of the policy. That means that you will receive money back if you cancel because of the growth rate of the policy. There are a few ways that you can take advantage of the cash value feature of whole life insurance policy.

  • You can take out a loan against the policy
  • You can surrender your policy and your insurance provider will issue you a check

If your financial needs are complex, the cash value feature of a whole life insurance policy can be beneficial. However, it’s important to keep in mind that the cost of whole life insurance is typically much higher than other types of life insurance coverage. There are also guidelines and fees that apply to this type of policy, which can make it a bit confusing.

How Can You Get Money Back for Selling Your Life Insurance Policy?

If you are interested in receiving money back after you have paid the premiums on your life insurance, another option is to sell your policy; however, generally, this isn’t the best idea.  When you sell a life insurance policy it is known as a viatical settlement.  Firstly, your loved ones will no longer have financial protection. Secondly, it’s likely that you won’t receive the full value of the policy. Thirdly, it can be difficult to find someone to purchase your life insurance policy because the buyer is essentially purchasing the rights of the death benefit that the policy provides.

Is Getting Money Back on Your Life Insurance a Wise Idea?

Above, we discussed three ways in which you can get cash back on your life insurance policy after you paid your premiums. While these options might be tempting, generally, they aren’t recommended. You could end up having to pay more out of pocket, you may not receive the full amount of coverage, and your loved ones may not receive the financial protection that they need when you pass away.  You also lose your coverage.  It will probably be more expensive if you want to get the same amount of coverage later.  If you have already canceled your policy, you can see what it will cost you to replace it here on Life Ant by getting a quote.

26 Comments

  1. An agent in 2015 sold my husband and I a 20 years life insurance policy with TransAmerica, my husband lost his job and he had to cancel, could that amount that he paid through his checking account go towards my policy.

    Thanks.

    1. Hi Doreen,
      Unfortunately you will not be able to apply that money towards your policy. The money paid into a term life insurance policy goes 100% to cover the cost of insurance, and there is no cash value account. Any money paid into the policy was the charge for your husband to have insurance. The only way you could possibly get money back, is if your husband pre-paid, and he gets a pro-rated return of premium on cancellation. It would be extremely rare to pre-pay for any period longer than 1 year, and the insurance company may not offer pro-rated refunds for term life. You need to check with transamerica to see their policy.

  2. I purchased a term life policy with a return of premium rider from Interstate Assurance Company in November 2000. Interstate merged with Protective Life Insurance Company effective 7/1/02. I have been paying premiums each month since. I’m currently contemplating cancelling this policy and wanted to know what if anything I could expect to receive from having this policy for almost 19 years.

    1. Hi Yolanda,

      Unfortunately, term life insurance does not hold any cash value. A cash value policy would have had much higher premium payments, so the value that you had was saving money for 19 years while having life insurance coverage. You should not expect to receive anything. There is one instance where it is possible to get money back. If your policy is a “return of premium” policy, you may be entitled to a return of payments made into the policy. The only way to know for sure is to check with Protective Life.

  3. I have whole life insurance that I’ve been paying on 10 years now and just switched to another insurer paying less a month but I’m getting more on my life insurance. I’m cashing out on my previous insurance. I’ve paid 45 dollars for ten years, shouldn’t I have cash value after paying on it that long? Any guess what that could add up to?

    1. Hi Latoya. Yes, you can expect to have some surrender value to your whole life policy. How much is dependent upon your face amount, health rating, dividend experience, dividend option, and whether or not you took any loans out of the policy. You can find out what your cash value is by contacting your insurance company. It is the only way to know for sure.

  4. I have a policy term of whole of Life insurance and was paying the premium for 6 years on a monthly basis for 200USD. We decide not to continue the policy. Can we get a full refund of our money we paid in 6 years? Thank you for your advice.

    1. Hi Kim. A whole life policy should have cash value after 6 years of paying premiums. The full surrender value may not be equal to the amount of money that you paid into the policy depending upon a number of factors such as dividends paid, the dividend option that you chose, whether or not a policy loan is outstanding, the premiums that you paid relative to the face amount, your cost of insurance, and if there are any surrender charges. You will need to check with your insurance company to be sure.

  5. My insurance with sunlife only pays out when I pass away but am paying premiers if I cancel insurance policy cani get my premier back plus the full amount of insurance money am cover for .

    1. Hi Miss Hutchinson. No, no insurance company is going to pay a death claim while you are alive unless you are terminally ill. You can only get premiums back if you have a return of premium policy. Think about this logic of this for a minute, if you have $50,000 of coverage, you may have paid in $1,000. If the insurance company pays you back $51,000, all they would have done was lose $51,000 on the deal. That isn’t a business that will be around more than a week.

  6. Several years ago, when changing jobs I had a life insurance policy get cashed out. Unaware of this, when I got the check I thought it was a scam and tossed it. At the end of the year I got a W-form to claim the money and pay taxes on it. Now, realizing this was not a scam, is there any way for me to get this check re-issued? Do I have any options to actually get this money? This was approximately 6-7 years ago.
    Thanks!

    1. Hi Joe,

      I would suggest two actions. The first would be contacting the insurance company that issued the policy. They MAY be able to reissue the check. More likely, check with your State as it is probably unclaimed money. Start here on your search. https://www.usa.gov/unclaimed-money. Good luck!

  7. Hello there,
    About 2 years ago me and my husband signed up for American Income Life Insurance for my son. We pay $100 a month. At the time we did not understand what was going on.
    As things have been tight with money we were wondering would there be any way to get our money back?

    1. Hi Katy. There is a good chance that this is a whole life policy or other permanent policy. You may have accumulated some cash surrender value, or you may not have anything substantial yet accumulated since 2 years is a short period of time for a whole life policy to build much value. If it is a universal life policy, you may have more cash value, or you may not. The only way to know for sure is to call the life insurance company and ask what you will receive if you surrender the policy. Be aware that surrender charges may also apply since it is the first couple of years of ownership.

  8. Hi, i was new in my life insurance policy.. it was 10years to pay and I had only 1 year paying it (monthly debit to my account). i want to cancel my insurance. Is it possible to cancel and have a refund?

    1. You will not get a refund unless the policy is specifically a return of premium policy, and even if it is you probably need to make payments on the policy for the entire term duration. If the policy is a permanent form of life insurance you may be able to surrender the policy for it’s cash value, which after one year is likely less than you paid in unless you made large initial payments.

  9. Hi. My husband and I have been paying into a life insurance policy for over 20 years with Sunlife. Our financial advisor recently retired. We now have someone new. He asked us if we are aware that our policy payments will increase to $800.00 a month in 2026 when we both attain senior retirement status. I was blown away by this. We currently pay $173.00 for the two of us and our three children. The children’s term policies are for their burial only. How do we get out of this set up. We will not afford $800.00 a month when we retire. Please advise.

    1. Hi Rita. It sounds like you have a term life insurance policy, and the renewal rate is $800 a month. You should look for a new policy right now since it will almost certainly be cheaper. If you have a 30-year term policy, you can actually retain the coverage in year 31 but your premiums are no longer level. The only time you should pay a term renewal rate is if you do not qualify for life insurance anymore due to a deterioration of health. Replace the policy now, or consider whether or not you really still need life insurance since your retirements will hopefully cover living expenses should you or your Husband pass away. Feel free to get a quote here at Life Ant, it only takes 3 or 4 minutes and you can compare prices.

  10. I purchased a whole life policy in 1997, I’ve been paying the premiums all the time. I took out a loan of $5K, I’ve been paying the interest only. Now, I want to cancel my policy or surrender it. Will I get any money from it? I got it from Chase Bank, I don’t remember the name of it, then it changed to Wilton Reassurance.

    1. Hi Colleen, unfortunately, it is impossible to tell given the information that you provided. You should have a positive cash value and should receive money upon surrender, but the amount of money that you receive could be anything from a few dollars to hundreds of thousands of dollars, depending upon your face amount, the premium paid, insurance rating, and your dividend experience and option chosen. You need to contact your life insurance company directly and ask for the current cash surrender value. You can also ask for an illustration, which will show you the projection for surrender value in future years.

  11. I have cancelled my life policy in July 2019 ,then by August still paid for the policy nothing determined how will I get back cash they have deducted for three years my policy was active

    1. Was your policy a permanent policy and did you have a positive surrender value? Three years is not a lot of time for a permanent life insurance policy to accrue cash value, but it could have significant value depending upon your face amount and the amount of premium paid, and the type of life insurance. If your policy is a term policy, you do not have any surrender value.

  12. I have been paying my life cover for maybe 6 months now n i feel that i want to cancel it will i be able to get a refund on the installments i payed

    1. No you can not get a refund. If the policy has any cash surrender value you can surrender the policy for the cash value. If it is a term policy you will lose the money that you paid into the policy, which hopefully was not too significant over only 6 months.

  13. Is it possible to purchase some type of life insurance policy, then turn around and sell it for, say 50% of the face value, with the buyer taking over the premium payments as well? Of course the buyer would receive the full face value upon my death. I’m 66.

    1. Gill if it was that easy to make money for free, everyone would be rich. No you can not do this. The premium payer (buyer) would do a calculation and realize that they will probably expect to pay premiums for another xxx amount of years, let’s say 19. They will use a pricing method such as a discounted cash flow method based on their expected cash outlay and desired return. You will find that your policy will be virtually worthless with the expectation that the buying party will pay the majority of the premium payments over the life of the contract. This type of sale is called a viatical settlement, by the way, and there is a very robust market for it with very established pricing methods. Had you taken out the policy years ago and paid a higher percentage of the expected premium over the lifetime of the contract, you would be able to sell the policy for much more.

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