Can I Reinstate A Life Insurance Policy I Have Surrendered?July 4, 2017
When you surrender your life insurance policy the policy is automatically null and void, without recourse for reinstatement. Since life insurance premiums go up as we age, you will not be able to reinstate the old policy because the rates charged on that policy are no longer valid. If you later decide that you need life insurance again, you will have to reapply for new coverage, even if you purchase from the same insurer. What about a new whole life policy, can I get my money back?
For a new whole life policy there may be only a small cash value saved, so it is usually not in your best financial interest to terminate such policies. As the face value, which is always much higher than the cash value, is lost because you have forfeited a legal contract. Some types of life insurance policies, such as term life policy cannot be surrendered but must be canceled.
If you find yourself in financial straits and decide to surrender a permanent life insurance policy, the insurance company will pay you the accumulated cash value of the policy minus any fees or penalties related to canceling the policy. The cash value is only a small portion of the premiums you have paid in, plus interest earned by that amount. With policies of these types, the only financial gain of canceling the policy is that you will no longer have to pay the premiums. Surrendering a life insurance policy does not mean you can claim the face value of the policy, only that you are entitled to get the remaining cash value back. Some companies will even allow you to use the accumulated cash value to pay future premiums, effectively using the life insurance policy itself to pay its own premiums. A better idea is to borrow against the cash value of the policy to help you through tough financial times without losing your coverage.