Are you considering canceling life insurance coverage to save the premium amount? Before you do that, consider the uncertainties in life. If you have any dependents, you need to take their financial security in your absence into consideration before canceling insurance coverage is crucial.
Five reasons why you must not cancel your insurance policy:
1. To take care of your family’s future financial needs
Your family members depend on you for all their financial needs when you are the sole breadwinner. In case of an unfortunate event, they may have to compromise on their lifestyle due to a liquidity crisis. When you cancel a life insurance policy, you deprive your family members of financial security in your absence.
2. Surrender charges may adversely affect your finances
You may cancel the current life cover to avail of a new policy in the future. However, you may have to pay a higher premium amount to procure similar coverage later. Moreover, if you are diagnosed with some illnesses, you may be denied coverage. Additionally, policies like an endowment, whole life plans, and money-back incur surrender charges and taxes, which give you a minuscule amount when you cancel the same.
3. To save income tax liability
When you ask yourself should I cancel my life insurance policy, take into consideration the tax benefits available on the premium. The insurance premium qualifies for tax deductions according to Section 80C of the Income Tax Act, 1961. Additionally, some policies like unit-linked insurance plans (ULIPs) offer tax-efficient returns on the investment when compared to other financial products.
4. Enjoy peace of mind
You may choose from various types of online life insurance policies that help you achieve different financial goals. Additionally, the policy may be used as collateral to avail of loans to meet short-term objectives. For higher coverage, you may choose riders like critical illness or accidental disability at an extra premium. Children’s plans and endowment policies provide financial stability for their future.
5. New coverage may be more expensive
Once you cancel the insurance policy, you lose the coverage. If you want to procure life cover later, you may have to pay a higher premium.
If you still think that the insurance premium may be a financial burden, insurers offer flexibility. Here is how you may prevent the surrender of your coverage:
Change the premium payment mode
If you have chosen an annual premium mode and find it difficult to pay, consider modifying the same. Speak to your insurance provider and opt for monthly or quarterly payment option. This reduces your burden and helps you meet financial constraints.
Eliminate the riders
Though procuring greater coverage through riders is helpful, consider the necessary ones. If you have riders that are not beneficial, eliminate these to reduce the premium cost. It is important to not include riders only because someone you know has these. Opt for riders that are suitable as per your requirements.
The answer to can you cancel your life insurance policy is ‘Yes’. But before you opt for it, bear in mind that life cover is crucial to meet uncertainties in life. Therefore, ensure you do not let it lapse or do not cancel it, as you may be risking the financial future of your loved ones. Therefore, stay insured and enjoy peace of mind.
