Do you believe that life insurance plans are intended to squander your money? Hold there before you consider cancelling one because, in this two-minute read, we have debunked every myth.
Ravi, a buddy’s friend, had obtained a life insurance policy. He has now utilised this policy as collateral for the repayment of his home loan and other debts. But, he later got an unexpectedly sizable sum from inherited property and had already paid off all of his debt. Although having paid back the loan, he still needs to cancel the life insurance coverage. He kept the coverage since he had two children who attended school and wanted both life and income protection.
A life insurance calculator is a tool you may use online to determine the amount of coverage required based on your needs.
Do not revoke a life insurance policy
Even though the goal has changed, life insurance will continue to provide Ravi’s family with additional financial protection in light of the uncertain future. In other words, cancelling a life insurance policy does not really make sense if you are raising a family and have people who depend on you financially.
You shouldn’t terminate your life insurance policy for the following reasons:
- To meet the financial necessities of your family’s future
The spouse, children, ageing parents, and any other family members would depend on the family breadwinner’s income and resources even after their death. When a regular source of income is lost, the family may have to make sacrifices in order to meet their basic necessities. One such product that aims to offer security and promote financial stability in the event of unfavourable income is insurance.
- Surrender fees may negatively affect your budget
Life insurance premiums can be the first thing that comes to mind when you’re trying to reduce your spending. It is absolutely a terrible idea to temporarily reduce the premium cost by cancelling the life insurance plan in the hopes of purchasing a new plan down the road. You might have to pay a hefty price for the same policy with equivalent coverage in the future. If an unforeseen disease is diagnosed, you may be unable to acquire coverage.
- To save some money on income taxes
Section 80C of the Income Tax Act of 1961 allows for the tax deduction of annual insurance premium payments. Simply put, cancelling the policy means that no additional life insurance premiums will be paid for it and that the insurer will not provide life insurance coverage.
This bonus will be forfeited if you cancel the policy. Unlike other investment options, life insurance policies such as endowment and unit-linked insurance plans provide you with tax-efficient returns. You cannot get a good tax return if you stop paying the premium in the middle and cancel the coverage. Life insurance is still required as a tax-saving measure, even if you are wealthy.
- For mental tranquilly
You may live without anxiety, thanks to insurance. Your long-term financial needs are met by an insurance policy, depending on your selected coverage. Also, because life insurance policies can be used as collateral for loans, they can assist you with your immediate needs. Several financial alternatives are also available through life insurance coverage. At an additional fee, it offers additional riders, such as critical illness, accidental disability, etc. You can plan for your children’s future very organised and methodically with the help of certain life insurance plans, such as child and endowment plans.
- The cost of new coverage may increase
You will forfeit the coverage you have paid for when you surrender your life insurance policy. If you need to get the same policy in the future, it can be more expensive because life insurance costs rise with age. If you still think that your life insurance is a burden on you, use all the flexibility supplied by the life insurance company. The life insurance coverage does not have to be cancelled. You don’t have many other options.
- Modify the premium payment method
If the annual premium is too much for you to afford, speak with your insurance provider about changing the payment schedule to monthly or quarterly. By doing this, you can get through a challenging moment.
- Release the riders
If your policy has any riders or add-ons for which you are paying extra and are not actually necessary for you, you can lower your premium by removing them from the package. Always mind that riders should be picked just as per your demand. Never purchase one just because your friend or your friend’s friend chose to. ##
A life insurance calculator is an easy-to-use tool to check the amount of premium you would have to pay.