What are your options if you cancel your life insurance policy?

Quick Overview: How to Cancel Life Insurance

• Within two months of signing the contract: You can cancel the policy with an eight-day notice period.
• At the end of the policy term: Notice of termination must be received by the insurance company no later than six weeks before the end of the term.
• Withdrawal within 30 days: A special right of withdrawal applies to life insurance; the start of the withdrawal period depends on how the policy was taken out and how information was provided.
• By mutual agreement: The policy may be terminated at any time, provided the insurance company agrees.
• Before sending the notice of termination: verify the surrender value, tax implications, policy terms, and coverage continuity with new insurance.

Not sure which termination method applies to your specific policy? Have our attorneys review your insurance policy, the terms and conditions, and your draft notice of termination before you send it to the insurance company.

When does it make sense to cancel life insurance?

People most often cancel life insurance due to a change in their financial situation, inadequately tailored coverage, or high costs associated with the investment component. Another reason may be replacing an older policy with new insurance.

However, mere dissatisfaction does not necessarily mean that immediate cancellation is the best solution. First, compare the price and scope of coverage, determine the surrender value, and review the tax implications. Sometimes it makes more sense to adjust the policy, lower the premium, or replace only certain riders.

How and when should you cancel a life insurance policy?

The methods for terminating insurance are primarily governed by the Civil Code, specifically the rules regarding termination, withdrawal, and expiration of insurance. The specific insurance policy terms and conditions are also important, as they outline the duration of the insurance period, the method of delivery, and any rules for calculating the surrender value.

If the contract was concluded through an advisor or other distributor, the Act on the Distribution of Insurance and Reinsurance may also be relevant. This law governs, for example, the obligation to ascertain the customer’s requirements and needs and to provide them with the necessary information before concluding the contract.

What are the ways to terminate a life insurance policy?

Cancellation within Two Months of Signing the Contract

The policyholder may cancel the insurance within two months of the date the contract was concluded. The insurance will then terminate after an eight-day notice period has elapsed. It is therefore not accurate to state that the contract ends at the moment the notice of cancellation is sent or delivered.

Termination at the end of the insurance period

For insurance with premiums paid on a regular basis, the policy may be terminated at the end of the insurance period. The notice of termination must be delivered to the insurer at least six weeks before the end of the insurance period. If it is delivered later, the insurance will generally not terminate until the end of the following insurance period.

Termination by Mutual Agreement

The policyholder and the insurance company may agree to terminate the contract as of any date. However, the insurance company is not required to accept the proposed agreement. The agreement must clearly state the date of termination of the insurance and the method of financial settlement.

Withdrawal from Life Insurance

For life insurance, the Civil Code establishes a special 30-day withdrawal period. For contracts concluded at a distance, the period begins at the moment the consumer was informed of the conclusion of the contract; the law also addresses situations where the insurance terms and conditions were provided later.

An additional right to withdraw may arise, for example, if the insurer has violated its statutory duty to provide information. The specific possibility of withdrawal must always be assessed based on the circumstances of the case.

Submit your notice of withdrawal in a manner that allows you to prove its content, the sender, and the date of delivery. Suitable methods may include a data box, a certified letter, personal delivery with confirmation, or another electronic method accepted by the insurance company.

A regular email without confirmation can be problematic, particularly because it is more difficult to prove its delivery and the sender’s identity. Therefore, always check the rules set forth in the insurance contract and the insurance terms and conditions.

From lawyers’ experience: Clients often consider the date the notice of termination is sent to be the date the insurance coverage ends. However, what is decisive is usually the notice’s delivery to the insurance company and the subsequent expiration of the notice period. We therefore recommend keeping not only the proof of mailing but also the delivery confirmation and the insurance company’s subsequent response.

If the insurance company or broker withheld important information or provided false information, you can challenge the contract as invalid. However, this is a task best left to a lawyer, and we ’d be happy to assist you with it.

How much will canceling your life insurance cost you?

Prematurely canceling your life insurance policy can have unpleasant financial consequences. If you’ve claimed tax deductions in the past, you’ll be required to pay back taxes for the last 10 years. People often forget this, and then face an unexpected tax adjustment during their annual tax filing or following an audit by the tax office.

Another financial consequence may be a low surrender value. For endowment or investment life insurance policies, the costs and fees specified in the policy terms and conditions are factored into the policy’s value. Therefore, especially in the early years, the surrender value may be significantly lower than the total premiums paid. The exact method of calculation depends on the specific policy.

Surrender Value: How Much Will You Get Back?

The surrender value is the amount the insurance company pays you if you terminate your life insurance policy early. Unfortunately, people are often disappointed because they expect to get back what they paid, but the reality is often different.

The amount of the surrender value depends on how long the policy has been in effect, how much you’ve paid in premiums, and what fees the insurance company has charged. If you have an investment life insurance policy, it also depends on the performance of the investment component. With term life insurance, no surrender value is paid out at all, since it does not include a savings component.

Especially in the early years, the surrender value may be significantly lower than the total amount the client has paid in premiums. The difference depends on the type of product, the agreed-upon fees, the term of the policy, and the performance of the investment component, if applicable.

Common mistake: The client first cancels the policy and only then inquires about the surrender value and tax implications. The safer approach is the opposite: first request a calculation of the surrender value, verify the tax implications, and only then choose how to terminate the contract.

How do you cancel a life insurance policy purchased online or through an agent?

Did you take out a life insurance policy online? If so, slightly different rules apply to you than for policies signed in person. If the policy was purchased remotely (e.g., online, via email, by phone, or outside of business premises), you have the right under the Civil Code to cancel the policy within 30 days without giving a reason. Simply send a written notice of withdrawal, and the contract is considered void from the outset.

Be careful, though: the deadline begins when you receive the policy terms and conditions, not on the date the contract was concluded. For example, if an advisor slipped a life insurance policy through your door and sent the documents later, a cancellation notice sent after 14 days may still be valid because the deadline hadn’t started yet.

When canceling a policy arranged through an intermediary, there’s an additional risk: incorrect or incomplete advice. Many people only discover years later that an advisor sold them an unsuitable product, often for the sake of a commission. If it is proven that the broker withheld important information from you or failed to act in accordance with their duty of care, the contract may be invalid. In such cases, we again recommend consulting a lawyer.

What is required for a valid cancellation?

Canceling a life insurance policy isn’t complicated, but the notice must be in the correct form and contain the right information. It’s not enough to simply tell the insurance company that you’re canceling the policy—and certainly not over the phone. The notice of termination must be in writing, must include specific identification of the policy (policy number, policyholder’s name, and social security number), and must clearly state your intention to terminate the policy. Ideally, it should also include the effective date of termination.

The requirements for cancellation are often specified in the insurance company’s terms and conditions. Some insurers also accept a data box or an email with an electronic signature, but generally, the safest option is a certified letter with return receipt or in-person delivery at a branch with a confirmation of receipt.

What to Watch Out for When Canceling Life Insurance

Canceling a life insurance policy can be a trap in several ways. Let’s start with the psychology: many people cancel their policy out of frustration without calculating what it will cost them. So the first rule is: always have the surrender value calculated, find out about any fees, and check whether you’re at risk of retroactive taxation.

Another common mistake is canceling life insurance without a replacement. If your current policy doesn’t suit you, it might be better to revise it or replace it with another one rather than canceling it entirely. In the meantime, you may not be insured, and if something happens to you (e.g., an accident or illness), you won’t receive a single crown.

If you submit your notice of cancellation later than six weeks before the end of the insurance period, the insurance will generally not terminate until the end of the following insurance period. Check your insurance policy and the terms and conditions for the exact details.

Summary

Life insurance can be terminated by notice, by mutual agreement, or, in cases specified by law, by withdrawal. Within two months of the contract’s conclusion, the insurance can be terminated with an eight-day notice period. For policies with premiums paid on a regular basis, notice of termination must be delivered no later than six weeks before the end of the premium period; later delivery generally postpones the termination of the contract to the end of the next period. For life insurance, withdrawal within a 30-day period may also be an option. Before terminating the contract, request a calculation of the surrender value, review any potential tax implications, and ensure that you do not remain without the necessary insurance coverage. The specific contract, the terms and conditions of the policy, and the method and date of delivery of the notice of termination are always decisive.