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Features
Ref. No. KLI/22-23/E-BB/492
Surrendering an insurance policy means terminating the relationship with the insurer. Evaluate the surrender value factor that will be received on maturity before taking any decision.
Surrendering the term plans implies terminating the insurance contract. There are different reasons why people choose to surrender their insurance plan. Some include attractive new insurance plans, inability to pay insurance premiums, lack of adequate benefits, etc. Irrespective of the reason, surrendering your term plan might not be a good option, especially if your insurance contract is in the final phase. Here is why:
What happens when you surrender your term plan?
When you surrender your term policy, your term insurance stands cancelled, and you are no more protected by the insurer. Besides, since term plans do not have a cash value and only offer pure life cover, you lose out on all the premiums previously paid.
Why should you not surrender your term plan?
It is not advisable to surrender your term plan because:
1. It can impact the financial security of your family in your absence:
Term plans provide financial security for your loved ones after you are gone. But when you cancel the plan, you devoid your family of this security. Your parents, spouse, children, siblings, etc., depend on you for their needs. And your absence can leave them financially struggling if you do not plan for their future. With term plan guaranteed death benefits, you can provide the much needed financial assurance to your family. The insurance benefit can act as a replacement of your income, helping the family stay monetarily stable.
2. You will lose out on the insurance cover as well as the premiums paid previously:
When you cancel your term plan, the insurance company considers the insurance plan null, and the insurance cover ceases to exist. Moreover, since term plans are pure protection plans with no cash value, all the premiums you paid before are lost.
3. You cannot claim any tax benefit for the premiums paid:
As per the Income Tax Act, 1961, you can claim tax exemption on the premiums paid for term insurance plans. But, when you surrender your policy before its maturity, you do not pay further premiums and your life cover lapses. Hence, you cannot opt for any tax exemption for the same. If you already have made a tax claim and cancel your term plan within three months, the claimed deduction becomes taxable in the year you surrender the policy.
4. You lose out on peace of mind offered by a term plan:
Term insurance gives you peace of mind that when tough times come, your family has a reliable insurance plan to fall back on. The policy benefits can help them meet their long-term financial goals. Further, term insurance plans offer several riders such as protection against major illness, disability, etc., enabling you to secure maximum coverage possible against uncertain times. But when you surrender the term plan, you deprive yourself and your family of this security.
5. A new term cover will be expensive:
When you surrender your term plan, your insurance cover is gone. This means that you would need to invest in new term insurance in the future. And you would likely be paying a higher premium than today, because of rising insurance prices, inflation, increasing age, health issues, etc. You would also need to go through the medical exam again that can influence your premium.
That said, rather than surrendering the policy, it is wiser to opt for a term cover that meets your requirements and budget. Trust Kotak Life Term Insurance Plans to provide you extensive coverage at premiums that do not hurt your pocket and features that adequately fulfil your needs.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
