In India, tax planning is one important task which makes many people invest their money in different schemes to get some tax exemption. Buying insurance policy is also one of the avenues where people get exemption over the premium payment of the policy year after year. This is one reason why people buy insurance policies without a need, that too which do not suit their requirements. Mis-selling of insurance policies by insurance agents is another reason why people fall in the trap of wrong insurance policies.
What if you have bought an insurance policy which doesn’t suit your needs? If it sounds like you, then rather than paying premium, it is always better to get rid from that bad insurance policy. Let’s explore some options which will let you get rid of unwanted insurance policy.
How To Exit From Unwanted Insurance Policy
Here we have listed 4 ways which can help you get rid of unwanted insurance policy:
1. Policy Lapse
It is one of the options to exit a bad insurance policy. Policy lapse happens when customers do not make premium payment on or after due date. This is one of the convenient but expensive ways to free yourself from a bad policy.
With Policy Lapse, customer will get rid of the policy. However, he/she will not get anything (money/cover) from the insurance company if the policy has not completed. The customer would also loose the tax benefits for the premium paid.
2. Surrender Policy
Policy surrender is another option to get rid of an unwanted insurance policy. In most cases, a customer can surrender his policy after three years of premium payment. On policy surrender, customer gets some money back from the insurance company. One thing to keep in mind is that on surrender, customer won’t get amount equal to what he paid for the policy. Insurance companies deduct various charges on the policy like administration charge, fund management charges, policy surrender charge which reduces the total amount.
If you have already paid two or more policy premiums, then it is better to go for policy surrender option. As in case of surrender, you will not only get rid of your policy but also get some amount back from the insurer.
3. Paid-Up Plan
Another way to get rid of an unwanted insurance policy is to convert your policy into paid up. You can check the term of the policy, if it allows you to make your policy “paid up”. When the premium for a life insurance policy is not paid on time and it lapses, then the Policy acquires a Paid Up Value and it is considered as a Paid Up Policy.
Once you pay the premiums on a life insurance policy for 3 full years, the policy does not become wholly void even if no subsequent premiums are paid. Such policies are known as paid-up policies. In such cases, the sum originally assured is reduced to a sum bearing the same ratio to the full sum assured. For example, if 6 out of the originally stipulated 30 premiums are paid, the sum assured under a paid-up policy would still be 20 percent of the original sum assured by the policy.
It is a good option to exit the policy. In this plan, instead of returning to the investor, the insurance company will convert it to life cover.
4. Continue Till Maturity
The last and best option to exit your insurance policy is to continue your policy till maturity. If you have paid most of the installments of the policy and only few are left, then it is better to continue the policy and get the full maturity value.
It is always advisable to buy insurance plan as per your needs. Understand your needs and then choose a right insurance policy for yourself instead of buying a wrong insurance policy.