Have you every think about the insurance policy which you have purchased from your insurance agent is whether suits your needs?. In India, most of the households has at least one insurance which is not meeting their needs. They have purchased only because of tax planning or agent’s misselling the policy. It is not worth for paying the premium which doesn’t suit your needs. But, unfortunately you have to loose money if you are surrendering the policy before its maturity period. This article explores some of the way to escape from the bad insurance policy.
If you are buying the new insurance policy, please understand the purpose of the insurance policy and the clear difference between investments and insurance. If you have any doubts, please post it in the comments section. Subscribe to our future articles here.
1. Let policy lapses
It is the costliest option because you are not going to get anything if the policy has not completed the three years. Also, you would loose the tax benefits for the premium paid. The only advantage is you are free from this policy. As I have already told, if the policy not suits your needs, get rid of that spending.
2. Surrender the policy
If you have paid the premium for first three years, surrender the policy. You will get some money back. But, the amount will be less compared to the what premium you have paid for the policy. The amount will be reduced because of the surrender charges. Last year IRDA has put the cap on these charges, which is Rs. 3000 or 20% of the annual premium in the first year if the premium is less than Rs.25000 or it will be Rs.6000 or 6% of the premium.
3. Convert it into a paid-up plan
It would be one good option, in this case insurance company instead of returning to the investor the policy will be converted to the life cover. It will be good option to exit the policy. It is possible only if you have paid the three years of premium payment.
4. Continue if the maturity is near
If you have almost paid the most installments of the policy and only few years remaining. Then it is wise to continue and complete the policy term instead of the exiting the policy. It would be a loss for you if you have surrendered the policy.
Do you have life insurance policy?. Don’t let agent’s decide suitable policy for you, you must understand your family needs and choose the best policy for you. If it is not worth paying, first step is to exit the policy and find the best term insurance plans. If you have any doubts, please post it in the comments section.
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