In short, no. While there may be some rare circumstances in which you could consider dropping your life insurance, most of the time it can be a risky move. Much like car insurance or even medical aid, you may see some short term benefits but the consequences of cancelling your life insurance can far outweigh any benefits.
When can you drop your policy?
Although it isn’t generally advisable, there are a few instances in which you could consider dropping your life policy.
If you have enough savings and investments to cover any financial shortfalls for your family should you pass away. However, if you are considering cancelling your life insurance due to financial circumstances, it’s unlikely that this is your situation.
Sometimes, retired individuals with no financial dependents, no debts and no desire to leave money to family or charities could consider cancelling their policies. Remember though, that just being retired isn’t a gurantee that it’s safe to cancel your life insurance.
When you shouldn’t cancel your insurance
You don’t take out life insurance to protect yourself, but to protect the people you love and care for. If you were to cancel your life insurance and pass away, would those people suffer financially? If so, then cancelling your life insurance isn’t wise.
Given that comprehensive life insurance can range from five to fifteen rand per day, it’s a sacrifice that is worth making to ensure that your dependents can still pay their bills, go to University or live in the same house.
Some life insurance policies will be impossible to cancel. For example, if you bought a house and had to take out life cover in order to cover your bond, you won’t be able to cancel this cover. This is because the banks need to be able to protect their loan should something happen to you.
The other consideration is whether you would want to take life cover out again in the future, once you are in a better place financially. Remember that the older you are, the more expensive your premiums become. If you took out a policy years back and were to drop your life insurance now and take it out again in six months, you would likely be in for a bit of a shock when you saw your new premium. This is the reason why you should take out life insurance while you’re young!
Instead, a better option to cut costs is to look at ways you could lower your life insurance premiums.
Perhaps you’ve stopped smoking lately, or lost weight? There are some underwriting factors that may lower your premiums, which you can read about here.
Another option might be to reduce the amount of cover. While this isn’t necessarily recommended, it’s certainly better than cancelling the entirety of your cover. You could look at reducing your cover amount by 25% in order to save on your premiums, and most insurers will allow you to increase the cover again at a later date without penalties; provided you haven’t had any changes to your health since then.