Cancelling Life Insurance Policies - Are There Any Hidden Fees?

There are many important factors you may need to consider before you cancel your life insurance policy. These would include thinking if you have adequate cover elsewhere, and are there other expenses you can cut back on first? However many people simply want to cancel their policy as they have found themselves a better deal. so what hidden fees are some life insurance brokers and financial advisers increasingly putting in place to try and stop you getting a better deal elsewhere? And the burning question, do you actually have to pay these cancellation fees if you have unwittingly taken a policy through such a company? Under FSA regulation, life insurance providers themselves can not charge you a cancellation fee if you find a better deal or simply want to cancel or change your cover. Legally they must give you 30 days in which you can cancel the policy and receive a refund of any premiums due. after this period you can cancel the policy at any time without penalty. so with an increasing number of companies that source you the cover charging administration fees there is an argument that some providers may be nudging life brokers and financial advisers in the direction of implementing these charges. Typical charges seen by some of the UK's largest life insurance brokers and financial advisers are in the region of 200 per policy. at the same time there are plenty of brokers and financial advisers who do not charge this fee and who do not sell by fear. the question may be if your broker has this clause how confident are they that they have actually given you the best deal? The other major question mark hanging over companies that operate with such penalty fees is whether such fees are within the guidelines of the FSA who authorise these firms. the FSA have for several years now been promoting within authorised companies a culture of treating customers fairly (TCF) and have 6 outcomes they require from authorised firms. Outcome 6 states - Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint. So if the provider themselves can not charge a 200 admin fee, why can a broker? And I think it would be fair to argue that such a fee, frequently on a policy costing from 5-20 a month, is imposing unreasonable post sale barriers by a firm to change product or switch provider. If you were paying 15 a month for your life cover and were offered the same deal for 12, a 200 fee to switch seems unreasonable. In this example that works out at over 13 times your monthly premium can you imagine the outcry if car insurance brokers for example tried to impose such a heavy fine when you went to switch your car insurance company at renewal time So what is the solution? Firstly I would argue you may want to use a broker that does not charge cancellation fees on a standard life insurance policy in the first place. If you can get the same deal from a company that does not have cancellation charges then why would you take the risk? you never know what the future may hold, circumstances change, prices change, and if any of them do, you would want to be given the right to switch and change as you choose without heavy penalties charged not by the actual provider, but by the broker or financial adviser. If, on the other hand, you have realised your current broker imposed this fee on you it is questionable if such a broker would be able to actually take the required steps to recover this 200 fee. so rather than going back to the same company that attempts to keep your custom by keeping you in handcuffs, speak to a broker that does not charge such cancellation fees and see if they can help you find a better deal...and quite possibly without having to pay heavy fines That way you get a better deal without the fear of a 200 bill dropping through the door if you change your mind or fall behind with a couple of payments. Cancelling Life Insurance Policies - Are There Any Hidden Fees? [l]