What Happens When You Cancel Life Insurance? 
When you cancel life insurance : 1 -RRB- With TERM insurance , there is no penalty and you lose no cash value , because there was not any cash value to start with . 2 -RRB- With PERMANENT insurance , you may take the cash value , minus surrender charges and fees , if any . If you do not have enough cash value to cover the fees , you owe nothing and receive nothing . The cash value may be taxable . There are other options than cancelling a policy if you can no longer afford it . You may be able to reduce the face amount , turn the policy into a reduced paid up policy , roll the cash value over into a new policy , or other options . Because at the end of the day , if you cancel your life insurance , you no longer have that protection . So consult with someone to find out your best choice in making that decision . 