Dis­con­tin­u­ing abruptly will put your life cover and other pol­icy ben­e­fits at risk

India Today - - KADAL (2013) JO BOLE SO NIHAAL (2005) KURBAAN (200 -

per cent.


Life in­sur­ance is a longterm agree­ment, so if the pol­icy is dis­con­tin­ued mid­way, the ma­tu­rity ben­e­fit is in­ter­rupted and not re­ceived. If cir­cum­stantces perevent you from con­tin­u­ing your tra­di­tional life in­sur­ance pol­icy, fol­low these op­tions:

Sur­ren­der: One can opt for this only when the pol­icy at­tains sur­ren­der value, which is usu­ally af­ter pay­ment of full pre­mium for two to three years, de­pend­ing on the terms of the pol­icy. On sur­ren­der­ing the pol­icy, the amount is paid im­me­di­ately, but the pol­i­cy­holder will not be en­ti­tled to life cover. Also, there could be tax im­pli­ca­tions de­pend­ing on the year of sur­ren­der.

Paid-up pol­icy: If a pol­i­cy­holder stops pay­ing pre­mium af­ter the pol­icy has at­tained sur­ren­der value, it au­to­mat­i­cally be­comes paid-up. The life cover and ma­tu­rity ben­e­fit con­tinue, but are pro­por­tion­ately lower—the cal­cu­la­tion is based on the num­ber of pre­mi­ums paid against the to­tal num­ber of pre­mi­ums due. Such a pol­icy will not be el­i­gi­ble for bonus in the fu­ture. When the pol­icy ma­tures, the pol­i­cy­holder will re­ceive only the paidup value.

Lapse: If a pol­icy that hasn’t crossed the ini­tial years and ac­quired sur­ren­der value is dis­con­tin­ued, it will lapse. All ben­e­fits will be lost.

Re­vival: Most in­sur­ance com­pa­nies al­low you to re­vive a pol­icy that has been stopped mid­way pro­vided it is done within a cer­tain pre­scribed pe­riod. This can be done by pay­ing late fee in ad­di­tion to the pend­ing pre­mi­ums, or af­ter ad­di­tion­ally un­der­go­ing a med­i­cal test.


Be­fore buy­ing life in­sur­ance, un­der­stand the pur­pose of the pol­icy and how it works so that it’s eas­ier to make it run its full course. How­ever, dis­con­tinue the pol­icy if you are un­happy with it or if you are over-in­sured. Fi­nan­cial ad­vi­sors say in­vestors can sur­ren­der and re­al­lo­cate to other as­set classes that of­fer higher re­turns. But, be­fore sur­ren­der­ing an in­sur­ance pol­icy, buy a sub­sti­tute life cover to guard against un­fore­seen even­tu­al­i­ties.

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