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.
also read:
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.
How to find surrender value of insurance policy?
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.
Summary
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.
Subscribe to our future articles here.
December 25, 2011 at 10:04 pm
Dear Mr. Krishna,
Kindly advise me whether Postal life insurance (Endowment Assurance) policy is good or not.
thanks
December 26, 2011 at 1:19 am
Is it a good option to have the policy that acts like a life insurance as well as investment plan?
December 27, 2011 at 6:02 am
agree with you on this “Don’t let agent’s decide suitable policy for you” because it is important for consumers to understand the purpose of insurance and identify the good insurance policies which would be suitable for their needful
December 27, 2011 at 6:09 am
Let me re-frame my question, i have a LIC policy, which gives me life cover and along with that they said that i will get good returns after 21 yrs.
So is this a good option what i have, or I should only opt for Life Cover from LIC and other investments firms for investments?
December 27, 2011 at 6:12 am
Hello Mudit,
It is not advisable to mingle both investment and insurance.
Thanks,
Krishna
December 27, 2011 at 6:26 am
Thanks Krishna, for such quick response.
I was expecting the same response, since i have heard the same from lots of people.
Can you please elaborate it?
December 27, 2011 at 6:34 am
Hello Mudit,
You read this article and comments:
http://www.thinkplaninvest.com/2009/01/difference-between-investment-and-insurance/
It may answer your doubts.
Thanks,
Krishna
January 6, 2012 at 1:22 am
1. I have SBI unit plus III Life Saver policy- ULIP (Paying Term 30 years). I have paid the first two premiums of 1,00,000/- each.
My next due date is nearing. Should I stay in this policy or surrender it and opt for Term Plan+MF SIP + PPF for long term.
I know that I may loose certain amount while I surrender this policy, but I would like to build a corpus for my Daughter’s Higher Education & Marriage.
2. Similarly I have Lic’s Jeevan Saral Policy with a premium of Rs.60000/- yearly. Three Premiums paid. Term 30 years & Assured amt Rs.18,50,000/- and Insurance of 12,50,000/-
Should I stay in this policy or surrender it and opt for Term Plan+MF SIP + PPF for long term.
I would like to build a corpus for my Daughter’s Higher education & Marriage.
Kindly Advise