We’ve just entered a new financial year. At the end of the last year, you may have purchased a life insurance policy. Maybe you had planned your policy purchase carefully, going over its fine print, making sure the policy suits your long-term interests. Or maybe you had not been careful, and are now realising that the policy is not in your best interest. Here are some thoughts to explore if you are not happy with your policy.
Use The Free-Look Period:
Policy holders end up buying the wrong insurance product for various reasons. Maybe they were in a hurry. Maybe an agent pushed the product on them. Maybe they were ill-advised by a relative. Once the policy is bought and the fine print understood, policy holders come to understand they have made a mistake. This is no calamity. Keeping this situation in mind, the Insurance Regulatory and Development Authority of India (IRDAI) mandates a 15-day free-look period. Within this time frame, you can write to your policy provider and initiate the refund of your premium and cancellation of your policy. Your premium would be returned to you after deductions for the pro-rated period of insurance, stamp duty and any medical costs.
Surrendering Your Investment-Linked Insurance Policy:
Let us assume you have maintained your insurance cover for a period of time and are now looking to exit it. The reasons could vary from the sum assured being less than desirable to the investment returns being sub-optimal. You have the option of surrendering your policy and recovering your premiums paid, subject to limits. The terms of voluntary policy surrender vary from one insurance provider to another, and are also governed by how long you have maintained the policy. After the surrender, you will receive your due surrender value, and your insurance cover will cease to exist. Before you exit a life policy, it is advisable that you purchase another life policy and complete its waiting period.
Let Your Term Plan Lapse:
Pure life term insurance plans don’t have a surrender value or maturity benefit, except in the case of a return-of-premium policy where the premiums paid are returned on policy maturity. If you want to exit your term plan, you may do so in the free-look period, or lapse it by not paying the renewal premium.
Get More Coverage:
If your problem with your insurance policy is that its sum assured is low or if its features are not to your benefit, you can always buy more life insurance products. To have optimal sum assured at low premium costs, you must pick a term plan. These pure insurance products not only provide adequate life cover, but also additional helpful riders and add-ons like monthly income, premium waiver, critical illness benefit, etc.
Make Your Policy Paid-up:
As a policy holder, you have the option of not paying additional premiums and convert your policy to a paid-up policy. After the payment of mandatory premiums, you can stop further premium payments. The number of minimum annual premium payments is typically three in case of traditional endowment plans, and five in case of Ulips. This way, you can maintain the insurance coverage, but it will be reduced in proportion to the number of years for which premiums have been paid. For example, you hold a policy with a sum assured of Rs 5 lakh for 10 years. You have paid premiums for five years and converted it to a paid-up policy. The coverage will continue for 10 years, but the sum assured would be Rs 2.5 lakh. Lastly, always think through your life insurance purchase. It should be in sync with the long-term money needs of your dependents. It should be bought after due care and calculation, and always after a thorough comparison of various options. When in doubt, go online to compare products — not just by premium costs but also by features.
(The writer is the CEO of BankBazaar.com)
