How to change or cancel your life insurance policy

A typical life insurance policy remains in force for an agreed number of years (known as the term) and with an agreed amount of cover that would be paid out in the event of your death. But a lot can change over the term of a life insurance policy. You may have moved up the property ladder, your earnings (and outgoings) might have increased or maybe your family has grown. Whatever your circumstances, it's important to make sure your cover would still be enough for your dependants should the worst happen.

On the other side of the coin, it's possible you've come into some money or your personal circumstances have changed to the point where life insurance is perhaps no longer a requirement.

How do I cancel my life insurance policy?

You can cancel your life insurance policy at any time and it's usually as simple as contacting the insurer directly and letting them know you'd like to cancel. But you'll want to be absolutely sure of your decision before you do, because you won't receive a refund of any of the premiums you paid or any other cash sum (unless you're cancelling within 30 days of your policy's start date).

Furthermore, once you cancel your life insurance policy, the cover will no longer be in place. So, if you're cancelling your policy to pursue a cheaper or better deal, you'll need to make sure your new policy has started before you cancel the old one.

You may be tempted to cancel your policy if your named trustees are no longer correct or relevant, for example, if you are divorced. If you set up your life cover in trust, most insurers will allow you to change the named trustee on the policy for a small fee, with some offering this service for free, so amending your policy may be of more benefit than cancelling it and starting again.

Should you wish to change the beneficiaries of your life insurance policy, this would depend on the type of trust you have. For example, some trusts specify a group of potential beneficiaries rather than specific names, so you should check your trust or speak to your legal advisor.

Can I change my life insurance policy?

Yes, usually you can make changes to your life insurance policy. However, this will depend on who your insurer is and what you would like to change. Different insurers will have different terms and procedures that dictate whether you can change the level of cover or term of the policy and many will consider adjusting your premiums if you declare that you've stopped smoking for example.

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Can I increase my life insurance cover amount?

If you're looking to either increase or decrease the level of cover your policy provides, most insurers will happily accommodate this. You may be asked to complete a renewed health questionnaire as part of the process, so that your insurer can determine what your new premium should be. So be advised that if your health situation has changed, you may end up paying more than you first expected. However, this could be the most cost-effective option, depending on how much of a change you want to make to the policy.

What is indexation in life insurance?

Some insurers allow policyholders to automatically have their level of cover increase on an annual basis in line with the UK Retail Price Index (RPI). This option, typically referred to as 'Indexation,' is designed to help towards protecting the level of cover against inflation without the need for further health checks, application processes or forms.

If your policy includes this feature, you'll usually receive a letter once a year advising of the change in cover and premium, with an option to reply to the company and reject the change if you don't want the increase to take effect. If you decide to decline the change, your insurer will usually remove indexation from the policy indefinitely.

What if my premium increases dramatically?

If the change you wish to make to your policy ends up potentially costing a lot more in monthly premiums, you may wish to shop around or use a comparison site to see if it's more cost effective to cancel the policy and start fresh with a different provider. Of course you'll be older than when you first took out your policy and this will be a factor in determining your new premium, but on the other hand your health might have improved or maybe you've stopped smoking. These factors can all have a bearing on the premium you pay so even if your current insurer is happy to change your policy, it might be worth running a new quote comparison, just to be sure it's the best deal.

The benefits of 'topping-Up' your life insurance

An alternative to changing your existing policy or cancelling and starting fresh is to 'top-up' your life cover by taking out another separate life insurance policy. This may sound odd if you're used to having one provider and one policy for each of your other insurance products such as home, car or pet, but when it comes to life insurance this is quite common and can in many cases be a more cost effective solution.

This may be of benefit if you've recently gone through a change in your life, such as a new home and higher mortgage, taking on additional debts or having children or other dependants now reliant on your income. If changing your policy or taking out a new one entirely is cost prohibitive, taking out a second policy so you have the combined benefit of the total cover might work out cheaper overall.

Can I have more than one life insurance policy?

Yes - there is actually no legal limit on the number of life insurance policies you can take out. You will just need to be sure you can afford to pay for the premiums and that the amount of cover and policy terms are right for you and your circumstances.

Are there alternatives to life insurance?

Yes, but again the benefits of the alternatives will depend on your circumstances. One option is death in service insurance, a product sometimes provided by employers as an employee benefit. Death in service insurance, otherwise known as 'group life insurance' typically provides a multiple of your salary as a payout should you die while working for that company. Not all employers provide this benefit, but if yours does, it's certainly worth taking up. A group life policy that covers you for, say, 4x your salary will certainly help either as a standalone alternative to life insurance or, more appropriately, as a top-up to your existing life cover.

What is the cut-off age for life insurance in the UK?

Insurance companies tend to have their own individual cut-off ages for life term assurance policies. In general, there aren't many companies that would accept applications from those aged 80 and over, with some insurers setting their age limit as low as 75. Those age limits could also come with limitations when it comes to the product type and term. For example, a 75-year-old may not be allowed to take out a policy for 15 or 20 years, but potentially could for 10 years. This will vary from company to company. An alternative for these customers is to consider Over 50s insurance policies.

It's important to consider whether or not you feel you might need or benefit from life insurance and whether or not a policy is affordable. If life cover provides value for money when the premiums are considered against the potential payout and you'd like the peace of mind of having a policy in place, then it may well be a good option for you.

If you're in any doubt, it's worth using a comparison site to compare life insurance quotes.

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