Why You Shouldn't Cancel Your Life Insurance Policy?
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A life insurance policy is purchased to provide your family with a financial safeguard in the face of an unfortunate event. However, there are times when people reconsider their choice because they feel it is a waste of money due to their inability to pay the continued high premium. Furthermore, the desire to save all the extra money spent on the premium might make you cancel your contract. But it would be best if you remember your long term goals and family’s future before making any rash decision. The following article would convince you not to cancel your life insurance policy because of such trivial reasons.
Why You Shouldn't Cancel Your Life Insurance Policy?
Here are some reasons that will help you recognize the importance of a life insurance policy.
1. Family’s Financial Future
A life insurance policy is meant to financially provide for your family after your demise. Moreover, if you are the sole breadwinner, the significance of a life insurance policy increases by multifold; hence, it is advisable not to cancel your policy to ensure your family's safety against an unfortunate event. The death benefits will help them maintain their current lifestyle and achieve their future goals.
2. Debt/Loan Repayment
People often avail loans or debts to purchase a new house or a car. However, if the person dies before repaying the loan, the burden shifts on his/her loved ones, which causes financial strain on their budget; here, the death benefits offered under a life insurance policy after the life assured's demise can help in the loan repayment.
3. Surrender Charges
Cancellation of an insurance policy like a whole life insurance policy, money back plan, ULIP, endowment plan would result in loss of your hard-earned money as the cash value growth would be lost. On the other hand, cancelling a term insurance policy will result in the loss of the paid premiums. Moreover, the policyholder would be obligated to pay some extra charges like surrender fee and taxes.
4. Expensive New Policy
Suppose you cancel your life insurance policy for now, but you might feel the need to repurchase it after a few months or years. In this case, the cost of buying a new policy can be higher as the premium rates increase with age. Moreover, if you are diagnosed with a critical illness during this period, you might not even get a suitable plan again because of the high rates due to the increased risk factor.
5. Save Taxes
The life insurance policy helps in saving money by providing tax benefits under Section 80C of the Income Tax Act. The life assured can claim a deduction from the taxable income to pay premiums for the life insurance policy for himself/herself, respective spouse or dependent child. This benefit will be withdrawn once you cancel your life insurance policy.
Takeaway
It can be concluded that a life insurance policy comes with multiple benefits besides providing life coverage. Therefore, cancelling your plan before the term ends will not only make you lose all the additional benefits but might leave your family financially vulnerable in the face of an unfortunate event. Hence, it is advisable to carefully compare all the plans before purchasing the apt policy for yourself. Moreover, suppose you are unhappy with your existing life insurance policy due to high premium rates. In that case, you can consult your insurance provider to make changes in the premium payment mode or get rid of some rider options, as it is not practical to eliminate the policy.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
