# Noncancellable Insurance Policy: What it Means, How it Works

## What Is a Noncancellable Insurance Policy?

A noncancellable insurance policy is a disability insurance policy that can't be canceled, have its benefits reduced, or its premiums increased by the insurance company during the life of the policy. You pay more for this type of coverage, but then your coverage and costs are predictable. Here's how a noncancellable policy compares against other options for disability insurance.  

### Key Takeaways

*   A noncancellable disability insurance policy can’t be cancelled, have its premiums raised or benefits cut as long as the customer pays the premiums.  
    
*   Under a noncancellable policy, even if your income falls, the company will keep the same level of coverage.
*   Many noncancellable policies expire at age 65, when most people retire.
*   Disability insurance could also be guaranteed renewable, meaning prices can go up over time, or conditionally renewable, meaning the insurer can change and even cancel your coverage.
*   Noncancellable policies are more predictable but can cost more than other options.

## How a Noncancellable Insurance Policy Works

When you apply for disability insurance, the cost depends on your age, health, and risk of disability from your work. This coverage can last many years and possibly your entire career. You pick how long you want the coverage to last. For example, you may want it to last until you turn 65. When applying, you decide what ability the insurance company has to adjust your coverage and premium cost.

If you choose a noncancellable insurance policy, the insurance company agrees that it will not increase your premiums, change your benefits, or cancel your coverage over the life of the policy. It doesn't matter if you develop health problems later or if your disability risk increases as you get older. The coverage and costs stay the same throughout your policy.

## Alternatives to a Noncancellable Insurance Policy

### Guaranteed Renewable

Disability insurance could also be [guaranteed renewable](https://www.investopedia.com/terms/g/guaranteed_renewable_policy.asp). If you buy a policy that is only guaranteed renewable, the insurer must let you keep your policy as long as you pay your [premiums](https://www.investopedia.com/terms/p/premium.asp). However, your premiums could go up as you get older. The insurer is allowed to raise the premiums on a guaranteed renewable policy as long as the increase affects numerous policyholders and not just a particular customer. For example, the insurer could increase premiums on everyone with your job or who is your age. It couldn't increase your premiums because you, as an individual, get sick or hurt.

### Conditionally-Renewable

Avoid purchasing a [conditionally-renewable](https://www.investopedia.com/terms/c/conditionally-renewable-policy.asp#:) policy. Also known as optionally renewable, this allows the insurance company to raise your premiums or cancel your coverage if the insurer thinks the risk of insuring you has risen. These policies put you at risk of losing coverage when you need it most and at a time when you may be unable to qualify for a new policy. The insurer can change premiums and other policy conditions annually, so this option provides the least beneficial arrangement for the insured.

Noncancellable disability insurance provides the most stability. However, these policies charge a higher upfront premium than the other options.

## Noncancellable Insurance and Income Change

Another benefit of a noncancellable [disability insurance](https://www.investopedia.com/disability-insurance-4427713) policy is that if your income decreases, your coverage will stay the same. If you were laid off from your office job and had to take up other work for less pay, for example, you would still be able to keep your insurance with a noncancellable policy.

Most people don't have any guarantee that their income will never go down. Under a noncancellable insurance policy, even if someone's income decreases in the future–such as when they are totally disabled–the company will pay the total benefit from the original contract. Under a noncancellable policy, even if someone changes jobs from a low-risk, white-collar occupation to a riskier one such as a professional race car driver, the company cannot decrease the insured's benefits.

## When Noncancellable Coverage Ends

Disability insurance usually has an expiration date. This applies even to noncancellable and guaranteed renewable policies. Many policies only cover until you turn 65 or 67. At this point, the coverage either ends or you would need to pay a much higher premium to maintain disability insurance. The noncancellable feature only locks in your premium until you reach this age and then costs can go up.

By age 65, many people no longer need life or disability insurance. Those who are retired or near retirement, and who have saved their money for many years will no longer need the financial protection that these products provide.

## Why should you pair guaranteed renewable and non-cancellable insurance?

A guaranteed renewable policy allows the insurer to change your future premiums. If you choose non-cancellable and guaranteed renewable coverage together, [you are in control](https://www.investopedia.com/terms/g/guaranteed_renewable_policy.asp) of any future changes. You don't have to worry about a price increase.

## Why might you want a noncancellable disability insurance policy?

A noncancellable policy prevents your insurance premiums from going up. These policies also offer protection when income changes. Under a noncancellable policy, even if your income declines in the future, the company must pay the original disability benefit amount. With disability insurance, if you take up another job for lesser pay, you would still be able to keep your insurance with a noncancellable policy and draw the original benefit as needed.

## Why should you be cautious of conditionally-renewable policies?

Conditionally-renewable policies allow the insurer to raise your premiums, modify benefits, or cancel your coverage if the company decides the risk of insuring you has become too high. This can put you at risk of losing coverage when you cannot afford to give it up, such as right after a serious injury or illness.

## The Bottom Line

Noncancellable insurance gives the policyholder peace of mind that the policy's cost, amount of coverage, and term are known. Future premium changes are also typically known when the policy is issued. You can rest assured that you won’t have to re-qualify for the policy at some point in the future when your health might not be as sound and insurance might be harder to get.

> **Article Sources**
>
> 1.  Disability Insurance Quotes. "[Non-Cancellable and Guaranteed Renewable Disability Insurance](https://www.disabilityquotes.com/articles/view/non-cancellable-guaranteed-renewable)."
>     
> 2.  Journal of the American Medical Association. ["The Association Between Income and Life Expectancy in the United States, 2001–2014."](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4866586/)
>     
> 3.  New York Life. "[Individual Disability Insurance](https://www.newyorklife.com/products/supplemental-insurance/individual-disability-insurance)."