Buying a life insurance cover is one of the major personal finance decisions you may have to take during your lifetime. Despite the easy availability of information about various products in the market, there are times when people end up choosing the wrong insurance policy. Blame it on one’s lack of research or misinformation from the selling agent, signing up for the wrong life cover happens more often than you might think.
This does not mean the end of the world. There are ways in which you can get out of a life insurance policy if you are not satisfied with it. If you are someone who got stuck with the wrong life insurance cover, this article is just for you. Here is a list of a few options you may try out when it comes to opting out of a life insurance policy.
Let it lapse
This is the easiest choice you can make when it comes to opting out of a life insurance cover. If you want a policy to expire, you can simply let it lapse by stopping your premium payment. Life insurance is a contract wherein you get a death benefit in exchange for the premium amount. When the premium payment stops, the insurer has no obligation to honour your claims. Even in ULIP and Endowment plans, there are provisions to get back the money if you stop paying premiums after a certain point of time. This option can be used if you have paid premiums for less than three years (in case of ULIPs and Endowment) or if you have signed up for a term plan.
Make the most of free-look period
As per the regulations set forth by the IRDAI, every insurer must provide 15 days of free-look period for a policyholder to cancel the policy without incurring any costs. While a free-look period provides only a limited window to explore your options, you can make the best use of this time by going through the different terms and conditions set for a life cover. If you feel that this cover may not be right for you at any point of time during the free-look period, you can simply cancel the policy and get back your premium amount. Certain charges such as stamp duty charges and medical examination charges may apply following cancellation.
Surrender the policy
If you have paid premiums for at least three years, surrendering is one of the best options to get a large portion of the maturity amount. In case of ULIPs and Endowment Plans, the policy will have a certain level of maturity amount every year based on the returns generated from the market. The cash value accumulated during the investment period, excluding certain charges and penalties, is called surrender value. Terms and conditions regarding the surrender value will be provided in the policy document.
Take add-on covers
If you are skeptical about going through the trouble of cancellation and buying life insurance once again, you may try changing the terms of your life cover to something that is suitable for you. One of the best ways to do that is by opting for add-on covers. With certain add-on policies, you can boost your life cover and get additional benefits. You may also check with your insurer to alter the terms and conditions based on your needs. For instance, if you feel that the coverage amount is inadequate, you may increase the sum assured amount at the time of renewal by contacting your insurer.
Converting to paid-up policy
This can be done only at the discretion of the insurer. Also, a certain number of premiums have to be paid before utilizing this option. A paid-up policy is one that provides life coverage for a specific term once the minimum number of premiums have been paid. By converting your policy to a paid-up policy, you can have access to life insurance coverage without paying premiums any further. However, the overall benefits available under this cover may be significantly reduced. One limitation with this option is that you may not get any settlement amount in return. If you are not in need of any immediate cash, you can certainly opt for this change.
If you feel that you have signed up for a wrong life insurance cover, you don’t have to be stuck with it for life. The options mentioned above provide you with the ways in which you can easily withdraw from a life insurance plan. Most importantly, you may not lose out on any significant benefits by following the above-mentioned options.
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