How to get life insurance discontinued if you are not able to pay your premium. If you are finding it difficult to pay the premium of your life insurance and you are finding it difficult to pay the premium installment, then you can also get your life insurance policy discontinued. Here we explain to you in detail in easy how you can get your life insurance closed.
How to close life insurance?
Life insurance is a long-term contract. It is better to continue as you buy it for the safety of your life and family. If you stop paying premiums prematurely or stop the insurance, then the insurance cover is removed from your life and you may also suffer financial loss. Still, if it is not possible to pay the premium of insurance for a long period, then we tell you how to close your life insurance in the right way so that you have a minimum loss.
Closing Term Life Insurance Policy
If you have a term life insurance policy then you stop paying your premiums then the policy automatically lapses i.e. the risk cover ceases. You don’t have to pay any extra charges.
Closing an Endowment or Money Back Plan
But if you have a policy in which a part also goes for investment and gets maturity value like a traditional endowment plan or money back plan then the situation becomes different.
Return will decrease
If the endowment or money-back policy is continued till its maturity, the returns are generally around 4-6 percent. Since a life insurance policy is a long-term contract, if you close it earlier, the original maturity amount is reduced by the insurance company and the returns you get are even lower.
If you want to discontinue your life insurance policy, then you have two options, either get your policy paid up or surrender it. For this, it is necessary that you have paid a premium for at least three years. After paying a premium for three years, the policy becomes surrender value. If the policy has not reached the surrender value, you may not get anything back when the policy is discontinued.
If you have paid premiums for three or more years and do not want to pay any premium in the future, you can convert the policy to a paid-up policy. Now you have to wait till the original maturity of the policy. Bonuses declared till now will be included in the policy but no bonus will be added to it in the future. Your Sum Assured will be reduced according to the premium paid. It will be called Paid-up Sum Assured. You can know from your insurance company how much will be the paid-up sum assured on your policy.
Payment on Maturity
The Paid-up Sum is Assured at the time of maturity and the bonus which is already added to the policy will be paid to the policyholder or the nominee.
If someone does not want to convert his policy to a paid-up policy and wants to stop your insurance completely, then he can surrender the policy.
When you inform your insurance company that you want to surrender the policy, the company will calculate the surrender value amount to be paid to you. You will get back the amount less than the premium paid but may get some bonus amount along with it. There is a prescribed formula to calculate the surrender value according to which the surrender value will be less than what you have paid as a total premium. This formula depends on the number of years of premium paid. The more years the premiums have been paid, the less will be the reduction in the amount. You should contact your insurance company to know the surrender value of your policy.
Before closing life insurance
Before discontinuing life insurance, make sure that you have adequate life cover in the form of other insurance policies so that your family can get financial protection in case of any sudden accident.
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