It sounds like you are talking about two different options. If your lost or stolen phone is covered by your Wireless Protection Program insurance, you can make a claim, pay the deductible, and receive a brand new device as a replacement. You would then continue on your current contract.
If you are looking to discontinue service for good, that is a separate issue. At any point in your contract you can discontinue your service and pay the associated termination charges. You can do this whether or not you decide to make an insurance claim on your phone.