- It ceases the life cover, leaving you and your dependents exposed to financial risks due to uncertainties of life
- You lose all future benefits and the intended maturity benefit
- Surrendering a policy attracts charges, which are deducted from the corpus saved
When 45-year-old Kaushik was all set to terminate his endowment life insurance policy before maturity, this close friend, and financial planner, Arindam happened to visit him. "Arindam's visit was most opportune. Had he not changed my mind about surrendering my life insurance policy, I would have rued the decision for the rest of my life," recalls Kaushik.
This was because, soon after his decision to continue the policy, Kaushik met with an accident. He was forced to take a sabbatical, resulting in a loss of pay. It was during this time, that a pay-out from Kaushik's endowment policy came in and helped his family meet their expenses for three months.
Surrendering or closing a life insurance policy before maturity exposes you and your dependents to the uncertainties of life. It can jeopardize your financial goals and life’s journey can be a tightrope walk. Here’s why you should think twice before discontinuing a life insurance policy.
- You Will Lose The Life Cover and Your Peace of Mind
Life insurance is a cushion that protects your family and dependents from the uncertainties, exigencies, and unpleasant surprises thrown by life. When you continue your policy till it matures, you are prepared to deal with most contingencies. Even in case of your untimely demise, the sum assured received in the form of a lump sum or the monthly pay-outs can help your family members stay financially independent.
Closing an endowment policy before maturity can also hamper your long-term financial goals like the down payment for a new house, buying a car, your children’s higher education, their marriage or even your retirement corpus.
Continuing your policy till maturity provides you continued life cover and help you address diverse needs at various stages of life.
- Tax Benefits and Regular Bonuses Will Be Gone
Tax benefits offered by life insurance policies are one of the most convenient and long-term ways to save tax. Premiums paid towards life insurance policy are exempt from Income Tax under section 80C of the Income Tax Act.
Moreover, life insurance policies such as endowment plans also pay the policyholders, loyalty bonuses in the form of regular pay-outs or lump sum when the policy matures. Endowment policies like Exide Life My Money Back Plan offer guaranteed survival pay-out for different needs at various stages of life. Similarly, Exide Life Income Advantage Plan offers guaranteed annual income and options to avail income pay-outs.
- Beware Of Surrender Charges
When you decide to terminate your life insurance policy before maturity, your insurer levies the applicable charges on the paid-up value, thereby reducing the total surrender value. Note that you are eligible to receive guaranteed surrender value only if you have paid premiums for at least three years.
- Buying A New Policy Is Going To Be More Expensive
You know that life insurance premiums are based on the age of the life insured. Hence, if you plan to discontinue one policy and avail another, anytime in the future, you will have to pay a higher premium than what you currently pay.
- You’ve Already Paid All The Major Charges
For most life insurance policies, the charges levied by the insurer reduce as the policy ages. Hence, discontinuing a policy after the first few years is to your disadvantage, because you have already paid the major charges. If you continue, the future premiums would attract lesser charges, and the savings would be more – which means that your corpus would be higher.
Leaving a Good Decision Incomplete
As you can see, there are several flip sides to surrender your life insurance policy before maturity. Not only do you expose yourself and your family to financial risks and uncertainties, but also devoid yourself of various benefits. Most importantly, you leave a good decision of securing the future of your family incomplete…
Exide Life Insurance offers several life insurance products that help you safeguard the financial future of your family. Know more about our products here.
