Why Should You Never Cancel a Term Insurance Plan?
Updated On Jun 02, 2021
Table of Contents
- Reasons Why You Should Not Cancel Your Term Insurance Policy
- Tips To Save Yourself From Cancelling A Term Insurance Plan
The unemployment rate is rising day by day, and the wealth of families has declined considerably. Inflation rates are higher as a result of which markets have been out of reach. As a result, everybody is trying to streamline their spending and cut some of the prices. In light of these problems, you might have thought about cancelling your term insurance to save some money. However, before taking such a step, note that life is full of confusion. In some tragic events, life insurance is the ideal tool to take care of the family's financial needs.
Unfortunately, many families view life insurance as a privilege rather than a necessity. Life insurance can sound trivial right now, but it may mean a lot of good to someone you love later down the road. If you have considered cancelling your life insurance policies to bring more funds to your savings, note the insurance costs only escalate with time. If you have a life insurance policy, cancelling a policy could be one of the expensive decisions you've ever made, and the same policy would cost you the same next year, even if your wellbeing hasn't improved.
Reasons Why You Should Not Cancel Your Term Insurance Policy
Term insurance might be a vital part of your retirement strategy. Here are some of the reasons why you can not cancel your policies at any expense.
1. To take care of the potential financial needs of your family
Your family members rely on you for all their financial needs because you are the only breadwinner. In the event of an adverse event, leading to a liquidity crunch, they could sacrifice their lifestyle. When you cancel a life insurance plan, you deny your family members of financial stability in your absence.
2. Surrender charges can adversely affect your finances
You will cancel the current life cover to allow the use of a new policy in the future. However, you can have to pay a higher premium later to get equivalent coverage. Also, once you are diagnosed with any diseases, you can be denied compensation. In comparison, programmes such as endowment, life-long plans, and money-back incur surrender costs and taxes that grant you a tiny sum of money when you cancel the same amount.
3. To save income tax liabilities
When you ask yourself if I should terminate my life insurance policy, consider the tax incentives offered on the premium. The insurance premium is eligible for tax benefits under Section 80C of the Income Tax Act, 1961. Such plans, such as unit-linked insurance schemes (ULIPs), provide tax-efficient returns on an investment relative to other financial goods.
4. To Continue Enjoying your peace of mind
You can choose from a range of online life insurance plans that help you meet various financial goals. Besides, the programme can be used as collateral for the use of loans to achieve short-term targets. For higher coverage, you can pick riders with serious condition or unintended injury for an extra premium. Children's plans and endowment policies offer financial security for the future.
5. New coverage could be more costly later
When you terminate your insurance policy, you forfeit your insurance coverage. If you want to buy life insurance later, you will have to pay a higher premium.
Tips To Save Yourself From Cancelling A Term Insurance Plan
If you ever consider the insurance premium could be a financial strain, the insurers offer flexibility. Here's how you can keep your coverage from being surrendered:
1. Shift the mode of premium payment
If you have selected an annual premium mode and find it challenging to pay, try changing the same mode. Talk to the insurance agent and select a monthly or quarterly payment option. This reduces the pressure and allows you to fulfil your financial constraints.
2. Delete the riders
While it is beneficial to achieve more excellent coverage by riders, consider the required ones. If you have riders that are not useful, do away with them to reduce the premium rate. It's crucial not to have the riders only because someone you know has the riders. Choose riders that are ideal for your needs.
Cancelling your term insurance policy can be a loss of your hard-earned money. In comparison, you will have to spend a significantly larger price to purchase the same policy later. Term insurance has become a must in this fast-paced country. It will help your family members fulfil their needs. When you cancel your insurance policy, your family will be left without a financial buffer.