How to Cancel a Life Insurance Policy in India

You may have bought a policy that does not meet your needs. Or the premium may now feel difficult to manage. If you want to cancel your life insurance policy, start by checking a few things:

• When did you receive your policy document?
• Are you still within the free-look period?
• Have you been paying your premiums regularly?
• What does your policy say about surrendering it early?

To cancel, contact your insurer and submit the appropriate request. During the free-look period, you can seek cancellation and an eligible refund. After that, an exit usually follows the policy’s surrender provisions, if available.

The free-look period starts when you receive the policy document, so keep that date handy. Simply stopping premium payments is different from submitting a cancellation request. Before deciding, confirm how much you would receive and when your family’s cover would end.

Cancellation, Surrender and Lapse: What Is the Difference?

Some eligible savings policies continue with reduced paid-up benefits when premiums stop. This means lower benefits without further premiums, rather than a complete loss of all value.

Cancelling during the free-look period

Under current rules, life policies with a term of one year or more have a 30-day free-look period from receipt of the policy document, whether received electronically or on paper.

If you have not made a claim, you can return the policy within this period, stating your reasons.

The refund can deduct:

• The cost of insurance cover for the days you were covered
• Medical examination expenses incurred by the insurer
• Stamp duty charges

For a ULIP, the value of units repurchased at cancellation also affects the refund. Do not assume the amount will exactly equal the premium paid.

The applicable free-look refund is due within seven days of the insurer receiving the request.

Exiting after the free-look period

Ask whether your policy has a surrender value—the amount payable when you exit early. Eligibility and calculation depend on the policy and applicable rules.

Pure term insurance usually does not provide a surrender payout. Return-of-premium, limited-pay and other variants can have different exit provisions; check your contract.

For a ULIP surrendered during its initial five-year lock-in, the applicable value moves to the discontinued policy fund after permitted charges. Life and rider cover cease, and the money is normally payable only when the lock-in ends.

Before Cancelling, Ask About These Alternatives

If the policy no longer suits your needs, cancellation may be reasonable. For example, it may duplicate other adequate protection or cover a loan you have repaid. Check whether your family still needs it for other responsibilities.

If the problem is affordability, first ask whether an available change could help.

A loan against a life insurance policy is borrowing, not a refund. It may be unsuitable if taking on repayments would worsen your financial strain.

If you want a different policy, compare it separately. A replacement requires fresh acceptance and may cost more because of your age or health. Have any necessary replacement cover in force before ending existing protection.

How to Cancel Your Life Insurance Policy: Step by Step

1. Check your dates and policy terms

Find the date you received the policy, the free-look provision and any surrender conditions. If the free-look deadline is close, contact the insurer promptly. 

2. Request the amount payable in writing

Ask for the refund or surrender calculation, deductions, outstanding loan adjustments and payment date. Also confirm when life and rider cover will end.

Example: Priya has paid ₹1.8 lakh towards a savings policy. Suppose her insurer quotes a surrender value of ₹90,000, with ₹10,000 of loan principal and interest to be adjusted. Her payment would be ₹80,000 before any tax is deducted.

The calculation starts with the surrender value, not the total premiums she paid.

3. Gather the documents requested

Common requirements include:

• Policy number and cancellation or surrender request
• Identity/KYC and PAN details, as required
• Cancelled cheque or bank statement showing the account details
• Policy document or additional declarations, where required

Requirements vary. Confirm the list with your insurer rather than assuming every document is mandatory.

4. Submit through an official service channel

Use the insurer’s authorised email, portal or service centre. State whether you are requesting free-look cancellation or surrender, and obtain an acknowledgement or reference number.

For Bandhan Life, check the service FAQs or write to customer.care@bandhanlife.com from your registered email address for guidance.

5. Track completion and check auto-debit

Keep the request, acknowledgement and final settlement statement. Confirm the policy’s status, payment received and whether any premium auto-debit mandate also needs action.

Cancelling auto-debit alone does not formally cancel the policy.

Could Cancelling Affect Your Tax Benefits?

Cancelling your policy can affect your tax in two ways:

1. Tax deductions you claimed earlier

If you claimed a deduction for your premiums, ending the policy too early can mean adding that amount back to your taxable income. For example, this can happen if you end a regular-premium policy before paying premiums for two years.

Suppose ₹30,000 must be added back. Your taxable income increases by ₹30,000. Your tax bill does not automatically increase by ₹30,000—the extra tax depends on your applicable tax rate.

For tax year 2026–27, these conditions fall under Section 123 and Schedule XV of the Income-tax Act, 2025. Earlier years used Section 80C. 

2. Tax on the money you receive

A surrender payment is not always tax-free. Its tax treatment depends on your policy and the applicable conditions. Before exiting, ask a tax adviser whether earlier deductions need to be added back and whether your payout will be taxable. ULIPs may require additional checks.

Make the Decision With the Figures in Front of You

Ask your insurer for three things: the amount you would receive, the date cover would end and any alternatives available. Then consider whether your family still needs that protection.

If you are comparing replacement cover, explore our  term insurance plans alongside your needs and budget. Confirm new cover is active before giving up protection you still require.

Frequently Asked Questions

Can I get all my premiums back if I cancel?

Not necessarily. Free-look refunds have permitted deductions. Later surrender payments follow the policy’s terms and can be substantially lower than premiums paid.

Can I cancel a term insurance policy?

You can request free-look cancellation if eligible. Afterwards, ask about the policy’s exit process. Pure term cover usually has no surrender payout; variants may differ.

How can I stop a life insurance policy without losing all its value?

Check whether you qualify for a free-look refund, surrender payment or reduced paid-up benefits. Simply stopping premiums does not ensure you receive money back.

Can I sell my policy instead?

Transferring a policy through assignment is different from cancelling it. It involves separate legal and contractual requirements. Do not treat a “life settlement” offer as a routine cancellation route; check with the insurer and obtain legal advice.

Will surrendering always create a tax bill?

No. The outcome depends on deductions previously claimed, termination conditions and the tax treatment of the proceeds. Check both aspects before deciding.