CAN I SKIP AN INSURANCE PREMIUM PAYMENT?
QI want to take out life insurance. But I’m worried about what would happen if I were to lose my job and couldn’t afford my premium payments. Would I lose all my money?
ALife insurance comes in two types – term or permanent, which is for the whole of life. The first provides protection coverage for a specified period and then the coverage ceases. Permanent insurance is long-term cover that stretches to the age of 85 – or beyond – and a policy can mature or be cashed in for its surrender value.
Term insurance is similar to renting – at the end of the term you do not receive any refund, while permanent is like buying a property on instalments – after a period of time equity accumulated may equal or exceed the instalments paid. What you choose to buy depends on life insurance needs, affordability and sustainability.
If for whatever reason you may not be able to continue premium payments, a term policy will lapse and coverage will cease; a permanent plan may have some equity that will carry the policy forward until such time that you are able to resume payments.
Life insurance is bought to provide financial security to dependents in the event of your premature death and provide cash in the event of disability or critical illness. As such, losing all of your money is not an issue as the benefits – if a claim is triggered – are worth many multiples of the premiums paid. Protection is the primary concern; return of your premium is secondary.
It is best to meet with an insurance consultant who can recommend the best life insurance solution based on your finances and affordability.
Tarun Khanna is CEO of Nexus Insurance and has over 18 years of experience in the financial sector