Earlier this year, I decided to cash out my life insurance policy. This is something that takes a bit of time to accomplish. It is not something one should do on a whim, or without a well thought out reason. Today, I am happy to announce that the cash out check has finally arrived. I consider this to be a great success.
This process started out with a phone call to the insurance company that I had this particular life insurance policy with. To summarize, I will simply say that it took more than one phone call before I was able to ask the insurance company to send me the required form. The form is necessary, because the insurance company needs to have it filled out and sent back to them before they will begin working on canceling, and cashing out, an insurance policy. My best guess is that there is some legal thing that requires them to have a person’s request to cancel a policy in writing before they can do it. This is only a guess, however.
The form arrived buried under a two page letter that I feel was designed to make me reconsider my request to cancel my policy. I understand that the insurance company is just trying it’s best to prevent loss. If I cancel my policy, not only do they have to send me money, but they also will lose the potential future premium payments that I would have paid if I kept the policy. I realize they want to do whatever they can to keep making a profit. However, the constant “reminders” that I had other options besides closing the policy eventually felt less like helpful advice, and more like nagging.
My husband and I filled out the required form anyway, and sent it back to the insurance company. After that, I got something called a “Policy Value Letter”. If you are in the process of canceling your insurance policy, and you get one of these letters, hang onto it.
This letter tells you what you can expect to receive when the cash out check arrives. It will detail the amount that was subtracted as a penalty for cashing out the policy, and potentially the taxes that were taken out as well. It may, or may not, come with more “helpful suggestions” designed to influence you to change your mind. In my case, it pointed out how much more money the death benefit would be than what the cash out amount would be.
When your cash out check arrives, take a close look at the amount that is on it. Then, go back to the Policy Value Letter, and compare the amount that is on the check with the amount that the insurance company said they were going to send you. These two numbers should be the same. In my case, they matched, which means I have completed the process of cashing out my life insurance policy.
Image by Jared and Corin on Flickr