There are times when insurance buyers get bewildered while purchasing a life insurance policy, and they end up buying the incorrect policy. There’s no such thing as an incorrect policy. But buying a life insurance policy that doesn’t align with your financial goals may turn out to be a poor financial instrument. If you feel that you have purchased the wrong life insurance policy and are now concerned about what to do next, there is no need to worry.
In case you have a life insurance policy that does not match your requirements anymore, there is no obligation to continue that policy for the entire tenure. Almost every life insurance policy arrives with an exit alternative if the policyholder does not wish to continue the policy.
Reasons for Cancelling a Life Insurance Policy
Life insurance policies offer the much-required cover of protection to you and your loved ones in case of any unfortunate event. While everyone needs to have a life insurance policy, there can be an array of reasons why you prefer to withdraw your policy. Some of the reasons for a life insurance plan cancellation are mentioned below:
- If you have foreclosed all your existing loans and hold enough buffers to safeguard your family on your own, you can cancel a life insurance policy.
- If you do not hold enough funds to pay the premium amount, you can cancel your life insurance plan.
- You can also cancel a policy when you think you have purchased the wrong policy and deplore purchasing it.
- You have discovered a life insurance plan that extends more dependable coverage at a more economical price.
How to Cancel a Life Insurance Policy?
You can cancel or withdraw the life insurance policy depending on the kind of plan you have taken. While you can easily terminate a term insurance anytime you wish, it is more challenging to cancel a whole life insurance policy.
Mentioned hereunder are a few steps on how you can cancel your term life insurance policies and even whole life insurance policy.
- Talk to your policy provider
The most suitable way for a life insurance plan cancellation is to talk to your policy provider and inform them why you do not wish to continue with your policy. Informing the policy provider about the cancellation can make the whole process easier.
Also, if the high amount of premium is the main concern due to which you wish to cancel the policy then, the policy provider can also work out resolving this problem so that there is no need for canceling the policy.
- Stop paying the premium amount
If you stop paying the premium amount of your life insurance policy even after the grace period provided by the policy provider, then your life insurance policy will automatically stand cancelled. However, this non-payment of premium is usually not the right practice, and you must always inform the policy provider about the cancellation decision.
- Cash-out your whole life insurance policy
Cancelling a whole life insurance policy can be a challenging task. If you hold whole life insurance, then, in that case, the best way to cancel that policy is to cash out that policy. The most beneficial part of this whole life insurance is that it owns a cash surrender value along with a surrender period.
If the policyholder cancels the policy within this surrender period, you can receive the entire sum after deduction of the penalty amount.
- Cancel the life insurance policy during the free look period
Another way to cancel your life insurance policy is to withdraw it during the free look period. A free look period is a term of 10 to 30 days where the policyholder can cancel the life insurance policy and will get a complete refund of the premium paid without much paperwork.
Can you get a refund when you cancel a life insurance policy?
While the life insurance plan cancellation process seems easier, people usually face problems while actually doing so. Hence, before cancelling a life insurance policy, you must keep in mind that even if you are paying the insurance premium for years, you will not receive any amount as a refund.
Apart from this, you will not even get the policy coverage once you cancel your life insurance policy. If you reapply for new life insurance policy, you will have to go through the complete application procedure again. In addition to this, the policy provisions of the term life insurance policies further hold the right to forfeit the entire premium amount.
Can your life insurance policy be cancelled?
The insurance company from which you have taken an insurance policy cannot cancel your policy in any case other than the two situations that are mentioned below.
Non-payment of the premium sum
If the policyholder fails to make the payment of the premium instalment, then, in that case, the insurance company provides them with a grace period of 30 days. In case the policyholder does not pay the premium even in that grace period, then, the insurance company holds complete rights to cancel your life insurance policy.
Another situation in which the insurance company can cancel a life insurance policy is when they find out that the policyholder has committed fraud or deception. If you wrongfully claim your death for the coverage amount, the insurance company can cancel the policy and also file a case of fraud against that person. Therefore, you must provide accurate information as failing to do so may lead to rejection of your application.
Should you cancel your life insurance policy?
While there are many reasons why a policyholder wishes to cancel a life insurance policy, it is not at all advisable that you cancel your insurance policy. The biggest reason why you must not cancel your policy is that if you do so, the premiums that you paid for a long time get forfeited, and all your premiums will go waste.
Life insurance policies are a positive move towards long-term economic devising and protecting your family. Hence, you must ensure that you never decide on purchasing a life insurance policy in haste. iSelect Star term life insurance plan by Canara HSBC Oriental Bank Of Commerce Life Insurance is one of the best life insurance plans in the country that provides comprehensive life coverage till the age of 99 years and all that at the most affordable monthly, quarterly or annual premiums.