6 Things to Consider Before Cancelling Your Insurance Policy

As a consumer, you have the right to cancel your insurance policy anytime you wish to. There could be many reasons as to why someone would want to cancel their existing insurance policy. This includes their inability to continue paying for it or the policy just simply does not work for their situation anymore. So if you are one of these people, here are a few things you need to know.

There are two ways to cancel your insurance policy.

The first way (which is highly recommended) would be to meet up with your agent and informing him officially of your intention. Your agent may have a million questions as to why you would want to cancel your policy, so be ready. Find out the proper procedure to terminate your policy, this may vary according to insurance companies. You may need to send in a official form. Make sure you keep all documents and that you receive a confirmation from the insurance company.

The second way is to stop paying for your monthly insurance premium. Your policy will automatically terminated or lapsed when you stop payment. However, such action may tarnish your record and make it harder for you to apply for your next insurance. So it’s best to be safe than sorry, go with the first method!

If your reason to cancel is to find yourself a policy that better suits your current situation, you might want to start searching for the new one first before cancelling the old one. Do a thorough research and make comparisons. Don’t forget to compare them with your existing policy too. Take your time before cancelling the policy and decide carefully when choosing a new one. You don’t want to take a new one just to realize later that it offers the same coverage as the previous policy.

Depending on the type of insurance, some offer a “free look” period of between 15-30 days. Take advantage of this. If you change your mind about the new policy, you can still cancel it and get the full refund as long as it is within the stipulated time period.

If you are looking to upgrade your policy, we highly advise that you speak to your agent before cancelling the existing one. Your agent may be able to suggest a better option such as adding to the policy the additional coverage that you now need.

What gap? Well the gap between cancelling the old one and having the new one fully effective. You shouldn’t end up with a period without any coverage. So make sure that your new insurance is running shortly after your existing policy is cancelled. The worst thing that can happen is not being covered by any insurance, however short the period may be. You just never know when accidents may happen. So don’t take the risk!

Another reason why you should always speak to your agent before canceling a policy! Find out if there are penalties waiting for you when you cancel the policy before the end of its coverage period. Make sure that your agent explains to you clearly regarding this matter as you do not want any extra costs for switching to a new policy. Usually, there will be no problem if you properly cancel your policy but there is no harm in asking for clarification. Ask your agent to clarify everything including whether your unused premium can be refunded or is there any penalties if you cancel the policy in the middle of the policy term.

Don’t take this lightly! Call your old insurance company or agent to confirm that the policy has in fact been cancelled. Miscommunications between the insurance company and the agent can happen. You wouldn’t want to end up with the company continuing to bill you even after you have cancelled it. To avoid this, make sure that you received a confirmation letter so that it’s easy for your future reference.

This is perhaps one of the most important questions you need to ask yourself before cancelling, especially if you are cancelling a health or life insurance. If you are cancelling a health insurance, understand that you have aged since you purchased the first policy. This isn’t the only change however, your health condition may have had some changes too since then. And since health insurance premium takes into account these factors, your next health insurance premium will be higher.

When you switch, the new insurance company will review your health condition again. If you have permanent health issues your new insurance company can exclude those from your new plan. This is bad, because anything related to those illnesses the insurance company will not pay. If you are lucky, the insurance company will not exclude them, but will increase your premium. So even though your new insurance will be better than your old one, you will pay higher because of your changed health condition. This is also why it is important to buy health insurance when you are young and healthy. You pay the lowest premium and are fully covered without exclusions.

As for life insurance, what you need to know is that a large part of the first few years of your premium goes to paying your agent’s commission. The percentage and number of years differ from company to company. So when you cancel a life insurance in order to purchase a different one, you need to understand that not only you will be paying higher premium due to changes in age and health status, but also a large sum if not all, of your premium the first few years will again go to your agent.

Therefore if you are cancelling a health or life insurance policy because you plan to purchase a ‘better’ one, find out from your agent if you can instead upgrade the existing one. Life and health insurance are long-term commitments and you want to make sure you picked the best one for you.

So, these are the 6 things you might want to consider before cancelling a policy. Insurance is a necessity. Make sure that you don’t cancel unless absolutely necessary or that you are looking to replace it with a better one. Know your requirements, your needs and your financial situation before deciding on a policy. The best way it to first do some research and then engage a reliable and experienced agent to advise you. You may find some of the best insurance agents on iBanding’s Agent Directory. Should you need to reach out to us for advice, we would gladly help too. Email us at support@ibanding.my anytime!