How to close your life insurance?

In summary

🏷️ Section	Details
📅 What leads to the closure of a life insurance policy?	A life insurance contract can be terminated in several ways depending on the circumstances and the choices of the policyholder.
🏦 During the policy term	Once the life insurance contract reaches its end, the policyholder can choose between two options: a lump sum payout or an annuity. A lump sum payout allows the policyholder to withdraw all of their savings at once, increased by the accrued interest. Converting to an annuity transforms the accumulated capital into regular payments, thus guaranteeing a lifetime income.
⚰️ In case of death	Upon the death of the insured, the life insurance capital is transferred to the designated beneficiaries in the contract. The life insurance is then closed. Beneficiaries receive the saved amount, increased by any gains, often under favorable tax conditions.
👪 In case of life or death	Some contracts include a “life or death” clause. The capital is paid either to the policyholder if they are still alive at the end of the contract, or to their beneficiaries if they die before that date. This provision offers a double guarantee: accessible savings in case of need for the policyholder and financial protection for beneficiaries in case of premature death.
🕒 Automatic closure at maturity	Some life insurance contracts reach their maturity date. At this point, the policyholder must decide whether to extend the contract, opt for a lump sum payout, or convert the capital into a life annuity.
📆 When can you cancel a life insurance policy?	Life insurance can be canceled at any time by the policyholder without prior notice, without respecting any due date, and without any particular law to specify.
💰 Total or partial surrender	Performing a total surrender to find a more rewarding contract or if the available investment support portfolio is insufficient. Alternatively, a partial surrender can be made to access liquidity while keeping the contract active.
🌐 Online cancellation	Since June 1, 2023, insurers must offer their clients direct access to the online cancellation feature, often called “cancellation in 3 clicks,” to simplify the cancellation process of the insurance.
⏳ Cooling-off period	Once the subscription is made, a 30-day cooling-off period is available to cancel the contract. During this time, sending a registered letter with acknowledgment of receipt to the insurance company suffices to annul the contract and recover the paid sums.
📂 Flexibility and availability	Contrary to what many savers believe, the capital is not blocked for 8 years. It is possible to perform a total or partial surrender at any time according to financial needs or savings management preferences.
📜 What is a total surrender of a life insurance policy?	Beyond the withdrawal period, a total surrender is equivalent to terminating the contract. Total surrender ends the contract permanently, resulting in the loss of its fiscal benefits.
✉️ Life insurance cancellation letter	The procedure for requesting a total surrender (equivalent to cancellation) requires notifying the insurer by registered letter with acknowledgment of receipt. Attach a bank account details document, the latest statement, and a copy of your contract.
🏦 Sample cancellation letter	A cancellation letter template is provided to facilitate the process. Include all necessary information such as contract number, required documents, and bank details.
💸 Taxation applied in case of cancellation	When performing a surrender (partial or total), only the interests are taxed. The tax depends on the date of premium payments and the length of the contract holding period.
🗓️ Taxation of premiums paid before September 27, 2017	Options between income tax or the Flat Tax Levy (PFL) decreases depending on the contract’s age.
🗓️ Taxation of premiums paid after September 27, 2017	The Macron reform introduced the Flat Tax or Single Fixed Levy (PFU):
🛡️ Tax allowances after 8 years	For contracts over 8 years, an annual allowance on withdrawn interests of €4,600 for a single person and €9,200 for a couple applies.
💼 Social contributions	The 17.2% social contributions are applied on the generated interests.
✅ Exemption cases	In certain cases, it is possible to perform a total or partial surrender without taxation on the interests, such as in cases of economic redundancy, early retirement, second or third category disability, or judicial liquidation of your company or that of your spouse.
🆓 Closing a life insurance: are there any fees?	Terminating a life insurance policy is free of charge. The surrender value consists of all premiums paid and capitalized interests, minus the life insurance fees deducted by the insurer.

Closing a life insurance policy may seem complex, but understanding the different options and procedures makes the process easier. This article guides you through situations that lead to the closure of a life insurance contract, the moments when you can cancel it, the tax implications, and provides a cancellation letter template. Whether you consider a total or partial surrender, you will find all the necessary information to make an informed decision.

What causes the closure of a life insurance policy?

A life insurance contract can be terminated in several ways depending on circumstances and the policyholder’s choices. Here are the main situations leading to the closure of a life insurance policy:

During the policy term

Once the contract reaches its end, the policyholder can choose between two options: a lump sum or an annuity. A lump sum allows the policyholder to withdraw the entire savings in one go, increased by the accrued interest. This option is often chosen to finance specific projects or to have a significant sum available at a given time. The annuity, on the other hand, converts the accumulated capital into regular payments, usually monthly, thus providing a lifetime income for the policyholder. This option is often preferred to ensure supplementary retirement income.

In case of death

Upon the death of the insured, who is generally the policyholder themselves, the life insurance capital is transferred to the designated beneficiaries in the contract. The life insurance is then closed. Beneficiaries receive the saved amount, increased by any gains, often with favorable tax conditions. This transfer of capital can be done quickly and without excessive formalities, offering an effective solution to financially protect loved ones. The choice of beneficiaries and distribution method can be modified by the policyholder at any time during the life of the contract.

In case of life or death

Some contracts include a “life or death” clause. This means the capital will be paid either to the policyholder if they are still alive at the end of the contract, or to their beneficiaries if they die before that date. This arrangement provides a double guarantee: accessible savings if needed for the policyholder and financial protection for beneficiaries in case of premature death.

Automatic closure at maturity

Finally, certain life insurance contracts reach their maturity date. At this point, the policyholder must decide whether to extend the contract, choose a lump sum payout, or convert the capital into a life annuity. Automatic closure at maturity means the contract ends, and the capital, along with any interest, becomes available to the policyholder.

For more details on the various closure methods of a life insurance policy, you can consult the information available on the official website of the Public Service.

These different situations show that life insurance is a flexible product, adaptable to the policyholder’s needs, whether for short-term use or long-term planning.

When can you cancel a life insurance policy?

Unlike other insurance products, life insurance can be canceled at any time by the policyholder. No prior notice, due date to respect, or specific law needs to be mentioned. This means you can close a life insurance contract without complex administrative constraints.

Total or partial surrender

Simply perform a total surrender if you find a more lucrative contract elsewhere or if you believe the available portfolio of supports is insufficient. Total surrender involves withdrawing all invested funds, ending the contract. Alternatively, a partial surrender can be made if liquidity is needed while keeping the contract active to benefit from its long-term tax advantages.

Online cancellation

Since June 1, 2023, insurers offering to conclude a contract via their website or mobile app are required to provide direct access to the cancellation feature. This measure, often called “cancellation in 3 clicks,” aims to simplify the insurance cancellation process and encourage contract changes to better meet the needs of policyholders. You can therefore easily cancel your life insurance policy directly from your online customer account, making the process faster and more convenient.

Cooling-off period

Additionally, once your subscription is made, you have a 30-day cooling-off period from your first deposit to cancel the contract. During this time, sending a registered letter with acknowledgment of receipt to your insurance company suffices to annul the contract. The insurer must then refund all amounts paid. This cooling-off period is designed to protect policyholders from impulsive decisions and give them time to reconsider after the initial subscription.

Flexibility and availability

Contrary to what many savers believe, the capital is not blocked for 8 years. That duration is only relevant for optimizing the taxation of withdrawals. As the invested money is accessible, a total or partial surrender can be performed at any time according to your financial needs or savings management preferences. Consulting insurance experts can help you understand available options and choose the most advantageous strategy.

What is a total surrender of a life insurance policy?

In life insurance, beyond the withdrawal period, if you wish to terminate your policy, you must proceed with a total surrender, which equates to canceling your contract. Total surrender has the effect of permanently ending the contract. As a result, the fiscal benefits associated with the contract are lost, which can be disadvantageous, especially if it’s over 8 years old. Transferring the capital to another life insurance contract is not possible, except in specific cases like the Fourgous amendment. For more information, see our article on insurance intermediaries.

Life insurance cancellation letter: downloadable template

The process for requesting a total surrender (equivalent to cancellation) is very simple: you just need to notify your decision to the insurer by registered letter with acknowledgment of receipt. To expedite the process, include with your request:

• A bank account details (RIB).
• The latest account statement.
• A copy of your contract.

Sample life insurance cancellation letter

Subject: Request for total surrender of life insurance contract No. [Contract Number]

Dear Sir or Madam,

I am the holder of life insurance contract No. [Contract Number], subscribed on [Subscription Date], with your establishment. I hereby inform you of my decision to proceed with the total surrender of this contract and thus terminate it.

Please send me the full amount due, including the invested capital and the generated interest, via bank transfer to the account details attached to this letter.

Attached are the necessary documents for processing my request:

• The original of my life insurance contract
• A double-sided copy of my ID
• A bank account details (RIB)

I kindly ask you to confirm receipt of this request in writing and inform me of any additional steps to be taken. In accordance with Article L132-21 of the Insurance Code, you have two months to process the transfer. After this period, the due amounts will accrue legal interest plus 50%.

Yours sincerely,

[Your First and Last Name]
[Your Address]
[Your Phone Number]
[Your Email Address]

Signature

What is the taxation applied in case of life insurance cancellation?

When performing a surrender (partial or total) on your life insurance contract, only interests are taxed, never the withdrawn capital part. The applicable taxation depends on the date of premium payments and the duration of the contract. Here are the main rules to know:

Taxation of premiums paid before September 27, 2017

For premiums paid before this key date (and the introduction of the Macron flat tax), you have the choice, regarding interest taxation, between:

1. Imposition under your income tax (according to your bracket): Interests are added to your other taxable income and taxed according to your marginal tax rate. This option may be advantageous if your tax rate is low.

2. The Flat Tax Levy (PFL) decreasing: This rate becomes gentler as your contract’s age increases:

   • 35% for a contract less than 4 years old
   • 15% for a contract between 4 and 8 years old
   • 7.5% for a contract over 8 years old
   • Additional social contributions of 17.2% are added to these rates

Taxation of premiums paid after September 27, 2017

For premiums paid since September 27, 2017, Macron’s reform introduced the Flat Tax or Single Fixed Levy (PFU):

1. Flat Tax or Single Fixed Levy (PFU): The overall rate is 30%, comprising 12.8% flat rate deduction and 17.2% social contributions. After 8 years, the rate of 7.5% applies to gains corresponding to contributions up to €150,000, and 12.8% beyond, still increased by 17.2% social contributions.

2. Income tax imposition: As with premiums before September 27, 2017, you can opt to include interests in your taxable income. This choice can be beneficial if your marginal tax rate is lower than the flat tax.

Tax allowances after 8 years

For contracts over 8 years, an annual allowance is applied on withdrawn interests. This allowance is:

• 4,600 € for a single person
• 9,200 € for a couple filing jointly

Social contributions

The social contributions at a rate of 17.2% are applied on generated interests. They are deducted each year from euro funds and at the time of surrender on unit-linked investments.

Contract Holding Duration	Payment Dates	Tax Options	Tax Rate	Social Contributions	Annual Allowance after 8 years
Less than 4 years	Before September 27, 2017	– Flat Tax Levy (PFL)	35% + 17.2%	17.2%	N/A
		– Income tax	According to your marginal tax rate
	After September 27, 2017	– Flat Tax or Single Fixed Levy (PFU)	12.8% + 17.2%	17.2%	N/A
		– Income tax	According to your marginal tax rate
From 4 to 8 years	Before September 27, 2017	– Flat Tax Levy (PFL)	15% + 17.2%	17.2%	N/A
		– Income tax	According to your marginal tax rate
	After September 27, 2017	– Flat Tax or Single Fixed Levy (PFU)	12.8% + 17.2%	17.2%	N/A
		– Income tax	According to your marginal tax rate
Over 8 years	Before September 27, 2017	– Flat Tax Levy (PFL)	7.5% + 17.2%	17.2%	€4,600 for a single person €9,200 for a couple
		– Income tax	According to your marginal tax rate
	After September 27, 2017	– Flat Tax or Single Fixed Levy (PFU)	7.5% + 17.2% (contributions under €150,000) 12.8% + 17.2% (contributions over €150,000)	17.2%	€4,600 for a single person €9,200 for a couple
		– Income tax	According to your marginal tax rate

Exemption cases

In certain specific cases, you can be exempt from any taxation on interests:

• Economic redundancy
• Early retirement
• Disability of the second or third category
• Judicial liquidation of your company or that of your spouse

To benefit from this exemption, the surrender must be carried out within the year following the event.

Events	Conditions
Economic redundancy	Surrender must be performed within the year following the event
Early retirement	Surrender must be performed within the year following the event
Disability of the second or third category	Surrender must be performed within the year following the event
Judicial liquidation of your company or that of your spouse	Surrender must be performed within the year following the event

Can I cancel my life insurance without being taxed?

In certain cases, legislation allows you to perform a total (or partial) surrender of your life insurance without bearing any taxes, whether on the capital or the generated interest. If one of these events occurs (concerning you and/or your spouse), the surrender will be exempt: economic redundancy, early retirement, second or third category disability, or judicial liquidation of your or your spouse’s company. The surrender must be made within the year following the event to benefit from this tax exemption.

Closure of a life insurance: are there any fees?

Terminating your life insurance is entirely free and allows you to recover the sum. The surrender value of your life insurance contract will consist, at the time of closure, of all premiums paid and interest capitalized, minus the insurance fees deducted by the insurer. This amount evolves each year, according to the interests or gains realized on your contract.

For further information