Can I Reinstate A Life Insurance Policy I Have Surrendered?
When you surrender your life insurance policy generally 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premiums go up as we age, you will not be able to reinstate the old policy because the rates charged on that policy are no longer valid.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.
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Getting your cash value
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.
Reinstating a life insurance policy sometimes may be possible
In some instances reinstating a life insurance policy is possible if you meet certain requirements. However, the answer to your question may depend on the type of policy you have surrendered and the terms of your contract.
Surrendering a term life insurance policy
If you have surrendered a term life insurance policy, which has no cash value, you may be able to reinstate it within a certain period of time after it has lapsed. The length of this period may vary depending on your insurer and your policy, but it is typically around 30 days. You will need to contact your insurance company and inquire about the amount of payment due on a reinstatement, fill in all paperwork truthfully, and remit payment to the correct address. You may also need to provide evidence of insurability, such as a medical exam or a health questionnaire, to prove that you are still eligible for coverage.
Surrendering a whole life insurance policy
If you have surrendered a permanent or whole life insurance policy, which has a cash value component, you may have more options to reinstate it. Some permanent policies have an automatic premium loan feature, which allows the insurer to use the cash value of the policy to cover your premium if you miss a payment. This can prevent your policy from lapsing in the first place. However, if your policy has lapsed and you have exhausted your cash value, you will need to follow the same steps as for a term policy to reinstate it. You may also be able to take advantage of features that allow you to stop paying your premium without your policy lapsing, such as the “reduced paid up” feature or the “extended term” feature. These features allow you to reduce your death benefit or extend your coverage period in exchange for your policy being considered fully paid.
Contact your insurer before surrendering
The best way to find out if you can reinstate a life insurance policy that you have surrendered is to contact your insurer and review your policy contract. They will be able to tell you what options are available for you and what steps you need to take. Reinstating a life insurance policy can be a smart move if you want to protect your loved ones financially in case something happens to you.