How to Close Out a Life Insurance Policy
There are several types of life insurance. The two most common are "term" and "whole life." Term policies offer a set amount of insurance benefits for a predetermined amount of time in exchange for a monthly or annual premium. Whole life policies allow consumers to build monetary value in their policies similarly to a savings account. Consumers may close out or cancel a policy to open a new policy with more favorable terms or to obtain the cash value of a whole life policy.
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Instructions
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Contact your insurance provider to determine the cash value of your policy or any penalty fees that may apply if you are closing out your policy before its maturation date. You should have the policy contract number available when you call.
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Write a letter to your insurance provider to express your intention regarding your policy. While some insurance providers may initiate policy closing over the telephone, it is in the best interest of the consumer to document the request in writing. Since there are several options for extracting funds from an insurance policy, such as borrowing against a policy, documenting a close-out in writing will protect your financial interests in the event that there is a misunderstanding between you and your insurance company. Something in writing is also helpful if a third party, such as someone with a power of attorney, is requesting the close-out. Consumers should keep a copy of the close-out request for their files.
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Complete the close-out paperwork that you receive from your insurance company. Double-check the paperwork to ensure that the payout amount, if applicable, is correct. After providing the information requested by the insurance company and checking any pre-populated information for accuracy, sign the documents and return them to your insurance provider. You should receive payment for any outstanding balance on your policy and a policy cancellation confirmation in the mail shortly after closing out your policy.
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