If you are the main source of income for your family, have you ever thought about how your family will survive if something unfortunate happens to you and you can’t be around? If you have bought life insurance, you can at least rest assured about the financial health of your loved ones if something like this happens.
So, what is life insurance? A life insurance policy is a legal agreement between the insurance company and the insured. The insurance company agrees to pay the amount insured by the policyholder to the beneficiaries of the insurance policy agreement when the policyholder passes away. The policyholder must pay the insurance company a premium to ensure that the policy continues. The main reason to buy a life insurance policy is to protect your dependents since the insurance company can help them financially after you pass away. In this fast-paced world, getting a life insurance policy is wise.
We all buy life insurance to protect our loved ones from problems they might have to deal with after we pass away. But sometimes, we think we should cancel our life insurance policy due to some reason or the other. Maybe the premiums are getting too expensive, or someone has told you it’s a waste of money. But one must think carefully before ending their life insurance, since there can be some considerable consequences of not having life insurance.
Here are some important reasons you shouldn’t cancel your life insurance plan:
- If you have money and valuable things, they may probably be used to pay off your debts in the event of your unfortunate demise. But if you were to not cancel your life insurance policy and instead continue it, the insurance company would pay out the insurance cover to your beneficiaries, which can help them pay the outstanding liabilities and debts.
- You will waste your money if you call off your life insurance policy in the middle of its term. If you try to cancel a policy during its term, you may not get any money back for the premiums you’ve already paid if you have indeed opted for such a feature.
- The rate of your premiums tends to go up as you get older. Because of this, your premiums will go up as you get older. An insurance company bases its prices on the average length of a person’s life. Hence, as you get older, your policy will cost more. If you decide to call off your policy in the middle of the year and then reapply for it a few years later, the premiums may be higher. So, don’t cancel your life insurance at a young age because you think you can get the same benefits when you apply later. You may get the same benefits, but you may end up paying more.
- Let’s not forget that you will lose all tax benefits that come with the insurance (tax deductions vary based on the old/new tax regime and are subject to change).
Applying for a policy again may not be easy either. Here’s why:
- If you buy a policy when you already have serious health problems, this will have a direct effect on your plan. The disease will determine how much your premium will be. As a result, if you call off a life insurance policy when you are young, healthy, and in good shape and then later get sick, you will have to pay more for the policy when needed.
- Your life insurance policy price may also change if you move or change your zip code. But only some insurance companies do this. Considering the risk factor, people living in postcodes that include areas affected by poverty or poor development may have to pay higher premiums.
It is up to the person who has the policy to decide whether or not to stop paying for it. If you can’t pay the premium, talk to the insurance company about getting a cheaper policy or finding other ways to insure your life. Just think about why you bought life insurance in the first place.
A good idea would be to use a life insurance calculator before buying life insurance. It considers multiple factors to give you a premium estimate. This can help you choose a more affordable life insurance plan.
