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Buy a term plan and secure your family
Life insurance protects you and your family from uncertain events and relieves the financial burdens of the dependents. However, sometimes it may happen that your insurance plan is not meeting your expectations and coverage requirements. Under such a situation, you may need to terminate or cancel your insurance plan.
Cancelling term insurance is quite common in comparison to other insurance plans. While cancelling a policy, you need to do it during the cooling period to get a refund of your premiums.
In the UAE, numerous insurance companies offer a host of term life insurance, targeting customers from all spheres. To find the best term insurance, you need to do thorough research amongst the available options. The following article focuses on term insurance cancellation, the process to do it, and various reasons due to which you may need to cancel your policy.
Our requirements and financial planning keep on changing over time and may omit the need for an insurance plan. It may also happen that you find a better insurance plan with coverages suiting your needs. Following are the main reasons for term insurance cancellation.
Whatever the reason is, if you have decided that the insurance plan won’t be helpful, you can follow the term insurance cancellation steps.
You can cancel your insurance policy by stopping the premium payments. On not paying the insurance premium, the insurer would nullify your policy and eventually remove the coverage. If you have surpassed the free-look period, stopping the premium payments is a convenient way. However, if you have the return of premium rider, the insurance provider is liable to pay back your premiums. In such cases, you need to follow the steps given below.
If the grace or the free-look period is over, the insurance company is not liable to pay any refunds. That’s the reason why most people stop paying the insurance premium against term plans.
When you terminate your term insurance plan in the UAE, your policy nullifies and does not provide you with security. Also, you won’t receive any premium refunds after exceeding the cooling period (free look period). The insurance company may charge a processing fee for cancelling your term life insurance; the charges vary depending on the company.
There are a few ways to secure your insurance premiums. Several insurance providers in the UAE offer a ‘return of premium’ add-on, which helps you receive your refunds if you ever decide to cancel your policy or outlive the insurance tenure.
As mentioned above, you can get your premiums refunded if you cancel your term insurance plan during the free look period or you take an additional rider known as return of premium. You must note that not all the term insurance providers in UAE offer a return of premium add-on. Also, buying a term plan with a premium return rider considerably increases the insurance costs.
With the add-on rider, you receive the premium back if you outlive the insurance tenure or terminate your policy.
Several insurance providers in the UAE offer the option of selling your term insurance plan. If you think you can recover some of the insurance cost, you can opt for selling out your term plan.
There are two ways in which you can sell your insurance plan, depending on the situation. You can opt for a vertical settlement or life insurance settlement, depending on the situation.
An individual diagnosed with a terminal illness can choose the vertical settlement option to sell the insurance policy. With the vertical settlement, the insurance provider offers the death benefits to the policyholder against the term insurance plan during the treatment. On the other hand, if the policyholder had cancelled the insurance plan, the company would not have paid any benefits. The insurer may not provide all the death benefits but a fraction of them.
With a life insurance settlement, you can convert your term life insurance into whole life insurance. The whole life insurance plan offers you a cash value along with the death benefits that you can withdraw any time after a specified tenure.
For a life insurance settlement, you need to have convertible term life insurance. As the name suggests, a convertible term plan can be modified into whole life insurance with all the related benefits.
You should consult a professional before selling your term insurance plan. After your policy is sold, you no longer can avail of insurance benefits and lose all the related rights. Your dependent members may need the insurance benefits, specifically the death benefits.
However, if they are self-sustained and won’t need the amount, selling your plan may be suitable.
Additionally, consider the charges, fees, and penalties (if any) that the insurer would levy on settling your term life insurance.
Certain situations and decisions may prompt us to cancel the term life insurance. Term plan cancellation is quite normal. However, you need to keep in mind that until and unless you take an add-on rider (return of premium) or you are under the grace period, the insurance company won’t provide you with premium refunds.
You can sell your insurance plan to recover some of the premium cost, but the insurance company only offers the sell-out option under certain conditions like terminal illness diagnosis. Additionally, you can convert your term plan into whole life insurance to avail of cash value along with death benefits.
It is important to consult an insurance professional or advisor before cancelling your policy as it can devoid you of life protection.