The short answer is no. It is never a good idea to surrender your term insurance policy. Think back to everything that has happened since March 2020. The coronavirus pandemic turned our world upside down overnight. It has been more than a year since several countries imposed lockdowns, but the virus continues to wreak havoc in our lives. In 2021, the second wave of the pandemic forced us to reconsider all our decisions, especially ones we’ve made about life insurance. The pandemic forced us to think about mortality. We realised just how quickly life changes. In an instant, we could leave our loved ones without any financial support. With all this in mind, it has become more vital than ever to have a good life insurance policy in place.
Why Term Insurance?
There are many life insurance plans available in the market. But, the most affordable type is a term insurance plan. Term policies provide high sum assured amounts at pocket-friendly prices. These plans do not offer maturity benefits or investment opportunities. So, insurance providers can offer them at lower rates. Individuals who are young and healthy can get sum insured amounts of 2 or 3 crores for as little as INR 1,000 per month!
Why Shouldn’t I Surrender My Term Insurance Plan?
Once you purchase a term insurance policy, you must do your best to pay your premiums on time. If you miss a payment, your policy will automatically get cancelled or surrendered. You will not face any immediate financial repercussions, but you will lose the life cover that your policy provides. Without this crucial cover, you could leave your family without any financial support in the future.
If you do happen to surrender your term insurance plan, purchasing a new policy at a later date will likely be far more expensive. Remember, your age and health will impact your premiums. Additionally, most term plans today offer a maturity benefit such as the return of premiums. Should you surrender your policy, you will lose out on the maturity benefit.
Surrendering your policy may seem like a good idea in the present, but it could harm your long-term finances. Some people are concerned about outliving their term policy. But, you shouldn’t worry. You can always convert your term insurance plan into a regular life policy before the maturity date. By doing this, you will continue to enjoy life protection without having to shell out for a new life insurance policy.
Benefits of Term Insurance
For several years now, term plans have been looked down upon since they do not offer maturity or investments benefits. But, these insurance policies come with a host of benefits, including:
Peace of Mind
Every insurance policy provides you with peace of mind. It’s a safety blanket that you and your family can rely on when you need it the most. The best term insurance policy will provide more than just life cover. Most policies today also offer critical illness and disability payouts. With such a plan, you can rest easy knowing that you and your family will always have a financial safety net to fall back on, no matter what life throws your way.
Value for Your Money
Most other life insurance plans offer a combination of investment and savings. So, these plans often come with higher premiums. A term insurance policy, on the other hand, provides life cover and nothing else. Term plans offer you the best value for your money, making them the prudent choice.
Since term plans fall under the life insurance category, the money you pay as premiums can get deducted from your taxable income. Every year, you can claim a deduction of up to INR 1,50,000 for premiums you pay under Section 80C of the Income Tax Act, 1961. If you’ve opted for a return of premium policy, the amount you receive at maturity is considered tax-free. Additionally, if anything happens to you during the policy term, the payout your nominee receives will not get taxed either.
Term policies have evolved in the recent past. Today, you can opt for a term insurance plan that offers more than just life cover. You can pick riders that will boost your insurance payout. Depending on your needs, you can opt for a plan that also offers disability and critical illness cover.
Term policies have become popular since they provide you with flexible payment options. Depending on your finances, you can opt to pay premiums annually, half-yearly, quarterly or monthly. More importantly, you can also choose whether your nominee should receive a single lump-sum payout or a staggered payment plan.
As you can see, every individual must have a term insurance policy. These plans provide financial stability when you and your family need it the most. So, never consider surrendering your term insurance plan.
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