What happens if I cancel my policy?
Cover stops for good and the contract cannot be reinstated on the terms you held. The insurer pays out the figure its own surrender schedule sets for that year, and any excess over the contract's tax cost is added to your income in the same year. Reducing the coverage, converting what has accumulated into a smaller fully paid amount, and taking a sum against it are separate routes, each with its own numbers.
What kind of answer this is
- Claim type: Contract fact
- Claim type: Tax or regulatory position
- Jurisdiction: Contract dependent
The surrender mechanic is a contract fact readable in your own document. The tax outcome rests on federal legislation as at the date printed on this page.
How it works
You sign a surrender request, the insurer closes the contract, and it releases the figure its schedule shows for that policy year less anything owed against it. The coverage ends on that date. A new contract later is a new application at your present age and health, priced accordingly.
The cost or the catch
Nothing here is reversible, and the money is very often less than the premiums that went in. That is the plain position, not an argument against leaving. Have the surrender figure and the taxable figure in front of you, in writing, before the form is signed.
Where this answer may not apply
- Within the free look period following issue a contract can usually be cancelled with premium returned, which is a different transaction entirely.
- Reduced paid-up coverage and coverage reductions are contract features, not universal rights, and some contracts carry neither.
- Where a corporation owns the contract the transaction arises in the corporation and the analysis is different.
- Contractual guarantees are obligations of the issuing insurer and depend on its financial strength. They are not government backed. Assuris protects Canadian policyholders within its published limits.
What to verify in your own contract
- The surrender figure today and at each of the next five years, with the guaranteed column read separately.
- Any charge still running against the contract, and the year it reaches nil.
- The current adjusted cost basis, in writing from the insurer.
- Whether reduced paid-up coverage is available on this contract.
- Whether the coverage would be needed again later, and whether it could be underwritten again at your present age and health.
Continue to the full explanation
Prepare for an existing policy review.
Sources
- The surrender and non-forfeiture provisions of the policy contract, insurer specific, verified 2026-08-30
- Income Tax Act, Justice Laws Canada, verified 2026-08-30
- Assuris, published protection limits, verified 2026-08-30
Accountability and disclosure
- Written by
- José Salloum
- Professional capacity
- Financial security advisor, Canadian Wealth Creation Centre Inc., operating as IBC Financial
- Reviewed by
- Tax and corporate tier, reviewed by a qualified Canadian tax professional before publication
- Jurisdiction
- Contract dependent
- Last reviewed
- 2026-08-30
- Version
- 1.0
- Compensation disclosure
- Canadian Wealth Creation Centre Inc., operating as IBC Financial, may receive insurer paid compensation if a policy is purchased. It takes the form of first year compensation followed by renewal compensation, and the amount varies by insurer, product, age, premium, contract design, riders and the arrangement with the managing general agency. No single figure would describe every contract honestly, and none is published here.
- Report a correction
- Info@ibcfinancial.com. Write without a policy number, medical information or account details.
Last reviewed 2026-08-30. By Jose Salloum, Financial Security Advisor.