Currently inflation is very high. Many people lost their jobs due to inflation and prices are out of control. Such a time can ruin your household budget and you may also need to borrow. In this situation it is natural to ask whether you should discontinue the life insurance plan or stop paying the premium? Life insurance is usually seen as a luxury rather than a necessity. Term life insurance is pure risk cover and helps your family financially when you are not.
Although it may tempt you to discontinue the life insurance plan or stop paying premiums in times of inflation, it may cause problems to your family in the future. If you discontinue the life insurance plan, it can prove to be your biggest mistake. So through this article we are going to tell you why you should not discontinue the life insurance plan.
Why you should not stop life insurance plan?
Do you want to discontinue your life insurance plan? Sometimes the payment of premium due to other expenses becomes a burden or you are unable to pay the premium due to inflation and other necessary expenses, then in such a situation you start thinking about discontinuing the plan. But you should not discontinue the life insurance plan due to the following reasons –
Life insurance scheme helps the family
The earning member of the family should have life insurance. Taking life insurance becomes even more important when there is only one earner in the family. Under the scheme you have to pay the premium and your dependents get the benefit. If the policyholder dies during the term of the plan, the family (nominee) is paid the sum assured under the plan. It is also called death benefit. If nothing untoward happens to the policyholder during the plan period and he survives, the benefit is not realized. What happens if you do not renew the life insurance plan? In this situation, you will not get any benefit after the death of the family earner and in future the family may face financial problems. The family may have problems in filling up children’s education, house rentals, car installments etc. The premium amount increases with age. Therefore, plan should be taken as soon as possible and should not be discontinued.
Loss of surrender of life insurance scheme
If you decide to discontinue the Endowment Life Insurance Plan or ULIP before maturity, the insurer pays the surrender value. In this case surrender charges are deducted, which vary according to the plans. If you discontinue the life insurance plan after 5 years, there is no surrender charge. Life insurance plans like endowment plans and ULIPs have surrender value. If you surrender a life insurance plan, you get a much lower amount than the premium paid. Many people surrender life insurance plans early and get little in return.
Stops getting tax benefits
You can avail tax benefits of up to Rs 1.5 lakh annually under Section 80C of the Income Tax Act on paying premiums for life insurance schemes. If you discontinue your plan by not paying life insurance premiums, you will not get tax benefits. If you claim a tax deduction on the premium of the life insurance plan and surrender within a period of 3 years, the tax benefit on the premium payment is not received from the year the policy is surrendered.
Getting life insurance at an early age is expensive
Life insurance premiums increase with age. When you are young and healthy, it is best to get term insurance. Premiums are lower at an early age and it is easier to get more coverage. Health begins to deteriorate with aging and sometimes diseases also occur. In such a situation, it is difficult to take term life cover. You may have to bear the brunt to pay the life insurance premium, but you will get the benefit in future.
Consider the following options instead of discontinuing life insurance
- If your life insurance premium is high, talk to the insurer and change the premium payment on a monthly or quarterly basis.
- If life insurance has riders (these are additional benefits at a higher premium), then you can leave the riders. Take riders only on need basis.
If you do not have life insurance,
- Your family may be in financial crisis.
- The family may be stuck in a debt trap.
- Also, they may have many problems due to lack of money.
