Is It Ever OK to Cancel a Life Insurance Policy? |
Posted: May 26, 2016 |
Life insurance policies are not always purchased for life. There always exist some considerable financial grounds on which a policyholder might decide on cancelling his life insurance, be it a term policy or a whole life insurance policy. It isn’t a very simple choice to terminate a life insurance policy and happens in a rare case scenario. However, dropping a life insurance policy isn't essentially a bad decision, mostly if you have encountered a major change in your portfolio or lifestyle; but it might bring along certain hidden overheads. Also, if a person wants to stay covered, he could consider other options than canceling the policy. Here are a few reasons for you to consider a change:Scenario IYour financial obligations have decreased Most of the people buy a life insurance policy to stay covered against certain expenses, for example, to provide financial support to their parents or to manage their child’s higher education fees. However, these goals might decline or accomplish over a period of time. As an individual gets older, the chief reason he had behind taking a life insurance policy might not be existent or relevant any longer. In the best situation, you might settle your debts and your children successfully complete their higher education by the time your life insurance policy expires. In such a scenario, you can conveniently choose not to restore the policy. But, in case you have misconstrued and do not prefer paying the premiums, then it is advisable to consult with your agent. If your policy consists of a return-of-premium rider, then you can obtain a check back in event of cancellation. Scenario IIYou have suffered a loss of revenue Term life insurance policies are comparatively inexpensive. However, if you have a whole life policy, then you might be paying twice the cost of a term life insurance plan. Now, in case of a loss of income, such a policy can strongly impact your budget. But, terminating whole life policy can be intricate. In most of the cases, cancelling a whole life insurance policy in early years can reduce its value. In fact, job loss can elucidate the significance of having a life insurance policy. So, basically, having a life insurance is crucial for the individuals who are in transition. A person should consider other options than straight giving up on the policy in the tough times. It is advisable to reduce the face value of the policy than terminating it outright. Also, the policy’s cash value might help you paying some premiums of the policy. Scenario IIIYou're not satisfied with the policy Some policyholders terminate their life insurance policy because they are looking out for better options that their existing policy; especially a better term insurance plans. Due to the ever rising competition in the Indian insurance market, people have started looking out for more and more options at better rates. Whole life insurance plans are often dropped because the policyholder does not receive gains as he expected to come out from the policy. This is because there exists a common misunderstanding about the life insurance plans with cash values and the returns from such plans. Therefore, one should read the new policy entirely and carefully before investing, and should not withdraw the existing plan until he is 100% sure about the new policy being effective. ConclusionOne might give up on his life insurance plan for genuine reasons because a person’s personal conditions, including failure of business or divorce with wife, can drastically affect his need for life coverage. However, dropping a life insurance policy is a personal decision, but, should ideally be for an unavoidable reason. But, in case an individual is in the need of a life cover and can afford it, then there is nothing that can replace a life cover of an appropriate amount. Keeping the life insurance policy in force should be the priority for every policyholder.
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