Top three reasons why you should avoid cancelling your life insurance policy.
Inflation rate is simply trending high on the increasing curve, incomes have gone down, unemployment has gone up and prices are out of control. When times get tough, the downward economy can play destruction with a typical Indian household budget. With the recession affecting so many families, it is natural for everyone to look for ways to decrease the budget or cut various expenses that may seem extraneous or based on luxury. However, your life insurance policy shouldn’t be one of them.
But unfortunately, many families consider life insurance to be a luxury rather than a need. Life insurance may seem a little insignificant now, but it can mean a great deal of value to the ones you love later down the road. If you have considered cancelling your life insurance policy to add some money to your account, consider the fact that premium of insurance only increases with time. Hence, if you have a life insurance policy, cancelling the policy maybe one of the expensive mistakes you ever make as the same policy will cost you same next year, even if your health hasn’t changed.
The key is to make the right choice for not only the immediate future and your current budget but by also keeping the long picture in mind. As well said, it is always a wise decision to buy a life insurance policy; it is an even smarter decision to do everything you can to keep it in force. Here are the top three reasons why you should avoid cancelling your life insurance policy.
Your only protection against the unforeseen events in life
Life is too uncertain and its unpredictability can rip you off both financially and mentally. However, the risk of an untimely death cannot be ruled out. In order to cover the financial losses arising out of such a risk, it is recommended to be invested in a life insurance policy. As it is not only the protection against those bad times which are difficult to predict but also against the events which can cause big troubles to your family after your unfortunate demise. Once you have brought a life insurance policy, your family can have a safe and secure future. Your insurance provider will pay the sum assured to your family members, thus providing a high degree of financial security when you are no longer around. Although it's difficult to conceive of now, the financial burdens when that time comes can be significant.
Heck! At Rs 680 a month for Rs. 1 Crore policy it’s cheap!
Unlike an investment plan, a term plan will not provide a return to you in the form of survival benefit when you are alive, but it will secure your family’s future in your absence by providing a high coverage at a nominal rate. One of the major advantages of a term insurance plan is its affordability. Term insurance plan comes with a low premium charge along with a high level of insurance cover. Term plan being the simplest form of protection plan can provide great value for the premium paid. It will secure your family’s financial future and help them to meet their basic needs in your absence.
The cost of life insurance depends on various factors and the policy chosen. Just as a general guide - a healthy 25-year-old can easily secure Rs 1 Cr of term life insurance for a tenure of 35 years for around Rs 600- 800 p.m. – much less than most people think of. However, the actual cost would depend on factors as you age, health and the amount covered. The life cover is at least 10 times the amount of premium paid towards the policy.
Your family will need to dip into their rainy day funds in the absence of a valid life insurance
In India, the sole breadwinner’s affiliation towards his family’s is very strong. To someone who spends more than half of his day working to provide comfort and luxuries to his family, financial security might seem redundant to him. But the question that needs to be answered is whether the family has enough financial resources to maintain the current standard of living if something happens to the breadwinner or the family will dip into using the emergency fund for their daily living?
In an unforeseen event of loss of life, you don’t want your family to suffer financially. In order to take care of their financial needs, you can keep a basic term plan in your financial portfolio.
(The author is Chief Business Officer- Life Insurance, Policybazaar.com.The views in the above article are the personal views of the author and do not reflect the views DNA)
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