After I surrendered my life insurance, can it be reinstated?

UPDATED: Jun 24, 2014

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance company and cannot guarantee quotes from any single insurance company.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.

UPDATED: Jun 24, 2014Fact Checked

Free Insurance Comparison

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

Asked June 24, 2014

1 Answer

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 policy is then null and void, without recourse for reinstatement.

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. The cash value is only a small portion of the premiums you have paid in, plus interest earned by that amount. The face value, which is always much higher than the cash value, is lost because you have forfeited a legal contract.

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. At that time, you will be charged the current rates for someone in your age and health bracket. 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premiums go up as we age, you will not be able to reinstate the old policy because the rates charged on that policy are no longer valid.

A better idea is to borrow against the cash value of the policy to help you through tough financial times without losing your coverage. 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.

Some types of life insurance policies, such as final expense or term life coverage's, cannot be surrendered but must be canceled. With policies of these types, the only financial gain of canceling the policy is that you will no longer have to pay the premiums. Since there is nothing to be gained and only a small amount to be saved, it is usually not in your best financial interest to terminate such policies as long as you are able to make the premium payments.

Answered June 24, 2014 by Anonymous

Related Links

Free Insurance Comparison

Compare quotes from the top insurance companies and save!

secured lock Secured with SHA-256 Encryption