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How to Cancel a Life Insurance Policy?

dateKnowledge Centre Team dateApril 19, 2021 views121 Views
How to Cancel a Life Insurance Policy?

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.

    Here’s all you want to know about a free look period.

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.

  • Deception

    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.

Here are 5 reasons why your life insurance application could be declined.

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.

ULIPs for planning your retirement

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.

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Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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