How to cancel your life insurance policy
If you have purchased an insurance policy and are not satisfied with the benefits it offers, you can surely cancel it. Remember, you must cancel your plan during the free look/cooling period which is of 15 days so that you can get a refund of the premiums paid by you.
The general process to terminate your life insurance cover-
Inform your insurer: Once you know that the policy terms do not match your expectations, you should communicate your intention to your insurer regarding the cancellation in writing. Some insurance companies also prescribe a standard form for cancellation of policy during the free look period about which you should be aware of. However, while cancelling your policy, you should mention all the information such as your policy details, date of receipt of the policy document, the reason for cancellation in the application.
The process: After receiving the cancellation request, your insurer will get in touch with you to know the reasons for cancellation and try to provide alternate solutions. However, if one still wishes to cancel their policy, then he/she will have to download the cancellation form from the official website of the bank or get a copy from any branch office. After the cancellation form is filled and submitted, the bank will carry out the procedure for cancelling the policy. Remember, no refunds will be made if the policy is cancelled outside of the cooling/free-look period.
What can be the reason for cancelling?
Before cancelling your policy, it is important to evaluate the reason as to why you are cancelling it. It is important to do so because after cancelling your policy, you will lose the protection it might have given to you and your family. However, at some point in time, there may be some valid reasons due to which you decide to cancel your policy such as-
- Switching to a new policy that is a better fit for you
- Your purpose of buying the cover has changed
- You cannot afford to pay premiums anymore
What are the alternatives available besides cancelling your policy?
If the primary reason for cancelling your policy is your inability to afford the premium amount. Then, in that case, you can contact your insurance provider and request a lower amount of life cover so that the premium amount payable also decreases. After becoming financially stable when you can afford to pay your policy premiums, you can upgrade your policy again. Your insurer will provide a few alternatives to you to retain the policy. If you find any of those suggested alternatives feasible, then there will be no need to cancel your life insurance policy.
Under what conditions are the surrender benefits payable?
On surrendering your policy before the completion of the policy term, a surrender benefit may be payable depending on the number of policy years that have been completed. Policies acquire a surrender value after three years. After completion of that specified period, a surrender benefit may be payable to the policyholder, provided the premiums for the specified period are paid.
Why should you avoid cancelling your life insurance policy?
- The primary purpose of buying a life cover is to provide a secure financial future for your family. If you cancel the policy, they will not be able to take the benefits at the time of the financial crisis when the policyholder dies.
- Purchasing a life insurance policy later can cost you more than what you are paying for your current policy. This is because, with the age of the individual, the risk cover also increases. Hence, insurers charge a higher premium.
- No surrender benefit is payable if the policy is surrendered before the completion of the specified time, which is usually 3 years.
- Certain bonuses and additions require the policy to be in force for a specific time. If you cancel the policy before the specified period, then you may lose the opportunity to enjoy such benefits.
- Tax benefits under section 80C for premiums paid cannot be availed. Further, the deductions made from the gross income previously will be regarded as income in the year when the policy is surrendered.
Bottom line
You should always explore all the alternate options available to you before requesting your insurer for the policy cancellation.
