Can I cancel a life insurance policy that I have a loan on.?

Question

The policies are still in the black as far as value goes. But, I don't see being able to pay them back soon.

Answer 1

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Answer 2

You didn't mention the total amount of loan, and the remaining cash value.

Yes, you can cancel the policy anytime you want. You do not have to pay the loan back. If you believe that you would not be able to pay the loan back, but want to keep the insurance, it will continue to accumulate interest charges. The total would be deducted from death proceeds.

If the total of the loan and the remaining cash value are more than what you've paid into the policies, the difference would be taxable as ordinary income upon cash surrender.

You can just pay the interest charge if you want to, then pay some as you can on the principle.

Depending on your age, and how long you've had the policies, you may just want to cash surrender them and buy new insurance.

By the way, "MJ S" said that you have to pay the loan back to cancel. You DO NOT have to pay the loan back to cancel the policy. The only way that would happen is if you could borrow more than the loan value, then you would have to pay that difference back. But, let me tell ya; that ain't gonna happen.

I suggest that you see a local professional agent, and have him/her do a Financial Need Analysis (FNA) to help you determine how much life insurance you really need. It will also help you determine if you need disability income insurance, and retirement savings.

The agent can also make recommendations on what to do with your current policies.

Answer 3

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Answer 4

Only if the cash value is more than loan can you surrender the policy.

You can pay off the policy loan and cancel at any time.

Answer 5

You can cancel the policy anytime that you want.  They can't make you continue to pay premiums.  If your loan balance had ever exceeded the cash value then your policy would have already lapsed.  

They will subtract your loan balance from your current cash value and pay you the remaining.