The purchase of an insurance policy can be counted as a major financial investment, especially considering that life insurance is a long term contract. Enough literature has been published about the various do’s and don’ts one must observe before purchasing a life insurance policy. And most buyers do follow this advice by paying due attention to their needs, as well as what the policy offers and it’s terms.
However, those who may not have exercised caution or diligence in purchasing their life insurance policy, often end up buying a plan that is completely out of sync with their needs and requirements. It may be because your agent has mis-sold a plan to you, or the plan came highly recommended from your friends, or because you have purchased a plan in a hurry to save on tax. Only after you have purchased the policy do you realise that it does nothing to help you fulfil your financial goals and provide protection to your loved ones. As unfortunate as such a situation may be, you need not continue living in insurance misery. There are a number of options that you can explore to salvage such an unfortunate situation, and here they are.
Surrender your Unit-linked Insurance Policy
ULIP plans are one of the most popular type of life insurance that many people opt for. Those who have taken a ULIP plan but wish to exit it due to any reason, can do so with relative ease by surrendering their policy. Subject to the terms of the policy, you can also get back the premiums which you have paid. There are varied terms and conditions surrounding voluntary surrender of a policy. The same is also influenced by the duration for which you have held onto the policy. Once you have successfully surrendered the policy, you will receive the surrender value which your policy may have acquired, following which your
life insurance policy will stop providing cover. However, do remember to purchase another life insurance policy to replace the policy that you plan to surrender so that you are not left without insurance coverage at any time.
Cease premium payment on your Term Plan
Those who have taken a term life insurance plan will know that these plans do not have any survival benefit or acquire surrender value (except for return-of-premium term plans). If you just purchased a term plan which is still within the free look period, you can simply contact your insurer and cancel the policy. However, if your plan is no longer within its free look period, you can exit it by withholding the renewal premium payment.
Utilise the policy’s free look period
There are several reasons due to which policyholders end up purchasing the wrong insurance policy. They may have purchased a policy in a hurry towards the year end to save on tax, or purchased one which was highly recommended by their relatives. Another major cause of policy mis-selling is pushy agents who have over-promoted the benefits of a plan that is otherwise unfit for the customer’s needs. Whatever the reason may be, the policyholder can still save the situation as long as they have gone through the fine print of the policy’s details and terms of coverage. It is keeping such a situation in mind that the IRDAI (Insurance Regulatory and Development Authority of India) has made it compulsory for all insurers to give the policyholder a minimum 15-day free look period. During this period, policyholders can contact the insurer and request for cancelling the policy and getting their refund as well. From the premium, the insurer will deduct cost of medical examination, stamp duty, etc.
Up your plan coverage
If your grouse with your life insurance plans is that it doesn’t provide sufficient coverage in terms of the sum assured, there is a fairly simple solution for it. You can enhance your life insurance coverage by purchasing another plan which will increase the collective sum assured. However, since premiums for life insurance plans can vary greatly depending on the plan you have taken, it is ideal to go for a term plan which offers high sum assured at low premiums. Another option to enhance coverage is to purchase add-on riders over your base plan which will help provide cover against additional risks. Some of the most popular add-on riders commonly available are critical illness rider, premium waiver benefit rider, monthly income benefit rider, etc.
Turn your policy into a paid-up policy
Another option for those unhappy with their life insurance policy is to let it turn into a paid-up policy. You can convert your policy into a paid-up policy by stopping premium payment after the mandatory premiums have been paid. In case of traditional endowment policies, policyholders are required to make at least 3 annual premium payments. For ULIP plans, the minimum premium payment requirement is 5. When you convert your policy into a paid-up policy, you still get to enjoy insurance coverage but in proportion to the minimum policy premiums that you have paid.
Life insurance is not a minor purchase which should be taken lightly. It is, after all, a long-term contract wherein you invest a significant amount of your income. To make sure that you get the best plan, always assess your requirements and
compare insurance plans before selecting one that is right for you.