Written by
Alok Mishra
Insurance Writer
Alok Mishra is a Digital and Content Marketing specialist with 10 years of experience. He has spearheaded Web Content, Social Media & Branding, and Community Building initiatives to drive growth for prominent brands.
Reviewed by
Bhaskar Sinha
Insurance Expert
8+ years of experience in Life Insurance with expertise in Developing Life and Health Products, Digital Sales, Conducting effective trainings and Key Account Management.
When you surrender your term insurance,the entire cover under the insurance plan terminates immediately. So, think about the impact of your decision on yourself and your family in the future.
The main reason why most of the people buy term insurance is to provide adequate coverage for their family when they are no longer there to support them. However, whenthey opt to discontinue their life insurance; they are keeping their family’s future at stake.
Also, the lifestyle is changing rapidly. If you are young and still not married, think of the responsibility on your shoulders when you reach family milestones of your life, like getting married or when your first child is born. With a current term insurance policy in place, you can even increase the coverage when you reach such significant milestones. For instance, if you have an existing term insurance policy with Rs 100 lakhs of coverage, you can increase the coverage by 50% (Rs 50 lakhs)once you get married and then by 25% (Rs 25 lakhs) when your first child is born. (Source: Axis Max Life Online Term Plan Plus Brochure)
Once you have given up on your policy, getting another term insurance might be costlier. As the premium becomes costlier as you grow old, you would have to pay more premiums in future.
| Parameters | Term Insurance Bought at the age of 25 (in Rs.) | Term Insurance Bought at the age of 30 (in Rs.) |
| Life Cover | Rs 1 crore | Rs 1 crore |
| Tenure | 30 years | 30 years |
| Annual Premium (in Rs.) | 6,372 | 7,906 |
If you later develop medical conditions, which becomes apparent after you have surrendered your first policy, the insurer might not be able to underwrite your increased health risk & you may not get the required cover or be able to increase the premium.
As term insurance provides lump sum benefits to your family in your absence, they are vital in securing the future of your family. Along with the lump sum benefit, a nominee can also receive monthly income just like any other monthly income plan.
In addition to the one-time payout, the monthly payout will be made to help your family meet the daily expenses, like school fees, loan EMIs, groceries, etc. In case you have opted for term insurance with increasing monthly income option, your nominee will get the payout along with an option of increasing monthly income, which will keep increasing every year for ten years.
As term insurance acts like a monthly income plan, it replaces your income and helps your family sustain their lifestyle even in your absence.
You might be healthy today, but what if tomorrow, a critical ailment strikes you? An ailment doesn’t harm you physically only, it can also hamper you financially, especially if you are the sole earning member of your family.
Therefore, it is necessary to be prepared to handle such situations and here, a term insurance plan can build the confidence to face such a situation. Additional financial protection is also offered to a policyholder in the form of cash payouts on diagnosis of critical ailments. The payout can be used to meet both medical and household expenses. Then insurers like Axis Max Life also waive future premiums when a policyholder is diagnosed with a critical ailment. It meansthe financial security net of the family will remain intact even without paying premiums. These benefits are available with riders and on payment of additional premiums.
If you are surrendering your policy, you will be missing out on the tax benefits that you can avail with your term insurance as per the prevailing tax laws. As per theSection 80C of the Indian Income Tax Act, 1961, the premium of a term insurance plan is tax-exemption up to Rs. 1.5 lakh per annum.
By surrendering your term insurance policy, you are not only losing your coverage but also the additional payments you have made in those earlier years. A term insurance plan is for your family, and not for you, so before coming to any such decisions, know its repercussions which your loved ones may have to face in your absence.
"Tax benefits are in accordance to prevailing provisions of section and subject to fulfillment of conditions mentioned therein. Policyholders are advised to seek tax consultants view for more clarity."
ARN:- Jul21/BG/19
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