Why is renewing your life insurance policy not a good idea?
If you are thinking about getting rid of your life insurance, you should stop and examine all the benefits it provides. It seems reasonable that doing so would increase your disposable income and prevent the outflow of premiums. You are, nevertheless, overlooking the numerous advantages of owning a life insurance policy. The protection provided by life insurance coverage far outweighs the premiums.
Can I, therefore, revoke my coverage for life insurance?
Of course, you can.
However, you should ask yourself, “What will I lose?” first. Losing life insurance and financial security could pose a long-term risk, even in cases where policy cancellation is allowed and practical.
Reasons to keep your life insurance policy in place
The family’s future security:
If your intention is to protect your family and make sure they have enough money after you die away, there is no need to cancel a life insurance policy. All of your family members—parents, spouses, children, and siblings—rely on you to meet their needs. They would thus lose their financial security and struggle to make ends meet if you were to disappear. Your family could have to substantially cut back on their spending and make compromises in terms of their standard of living if you do not plan for their future.
With a life insurance policy, you may provide your loved ones with much-needed financial stability with guaranteed benefits. The insurance payout can take the place of your pay, maintaining the family’s financial stability. In the event of your parents’ demise, your children’s marriage, your spouse’s retirement requirements, or even just ordinary household expenses, a life insurance policy may act as a substitute for income. If you cancel your life insurance policy before its expiration date, however, you will not be able to provide these benefits to your family.
- Decrease in value:
A mid-term policy cancellation that takes place prior to the completion of all outstanding payments is considered a nullity by the insurance provider. As a result, the answer to the query of whether you may cancel your life insurance policy and get your money back depends on the particular type of coverage. There is no cash value and yvalue,n’t receive a reimbursement for all of your prior premium payments made on a term insurance policy.
Nevertheless, in some cases—for example, if you have whole life insurance, money-back policies, endowments, etc.—the insurance companies will allow you to pay a surrender price. Even in this case, you miss out on the appreciation in cash value because the surrender price is frequently rather high. If the surrender charge is high, your primary justification for terminating the policy may be negated. - There is no benefit to taxes.
The Income Tax Act of 1961 exempts life insurance policies from paying taxes on both the premiums paid and the maturity amount. However, if you cancel your policy before it matures, you lose any premium paid, and your life insurance expires. As a result, you are no longer eligible to submit any tax exemption applications. If, after making a tax exemption, you decide to cancel your insurance plan within three months, the deduction will be taxable in the year the plan is canceled.
- Loss of peace of mind:
You may be sure that you will always have a reliable insurance plan in case things get tough if you have life insurance. Furthermore, a life insurance plan might help you effortlessly reach your long-term financial goals. Furthermore, you can keep your life insurance as a mortgage and take out a loan to meet any urgent demands. To ensure you have the best defense against unanticipated events, insurance products often include many riders. But when you cancel the insurance, you deprive yourself and your loved ones of this security.
- A new cover is an expensive purchase.
If you cancel your current plan, you will no longer be covered by insurance. This suggests that if you buy a life insurance policy in the future, you might have to pay a higher premium than you do now because of things like growing insurance prices, inflation, becoming older, etc. You would also have to go through the entire process of a medical examination. In line with the plan.
Obtain life insurance policies at a reasonable cost.
Tata AIA Life is conscious of your need to give your family stability and your financial constraints. You can just choose one of our reasonably priced term life insurance policies to safeguard the future of your family.
Our term plans include unique features and provide you with total choice over choosing a level of coverage that is within your means and a premium payment schedule. Therefore, rather than canceling your policy and leaving your family vulnerable to future unanticipated disasters, you might consider purchasing a cheap protection plan through life insurance. Remain cautious, weigh all of your options, and refrain from making snap decisions.
