Monday, February 22, 2010

Why you should not cancel your life insurance policy

Reasons for not canceling your life insurance policy
When facing economical downshift, it can be quite tempting to minimize costs by refusing certain things you might feel as useless or luxury. However, insurance should be amongst these things. Having your life insured may look like a loss of money now, but when the moment comes it can be a great deal in sustaining and supporting your spouse and children from the financial point of view.
If have your life insured, having your policy cancelled can turn into a big mistake from the financial point of view in the long run. Of course, it is very hard to resist such a temptation when having to pay high premiums that do you no favor in means of lowering your expenses. But you have to see the whole picture rather than concentrating on details. The following are six important reasons for refusing to cancel your life coverage policy.

1. Insuring your life is an investment.
When people choose to insure their lives they provide a valuable investment to their loved ones that can be used after certain circumstances. Of course, it's very hard to grasp the situation when you are gone and the relevance of your needs, but think about your family. Losing a key person will lead to serious hardships that will affect the financial situation of your spouse and children as well. And when you insure your life you ensure that your loved ones won't be experiencing financial problems.

2. Life insurance premiums have already been paid.
This will sound as the most logical reason for those who are thinking about the "now" situation. Just think of all the premiums you have already paid. This especially refers to those who had their policies for a while now. Unless you have special types of insurance policies, all the premiums you have already paid will simply turn into a waste of money.

3. You can raise the cash value of your policy with time.
In case you have universal or variable life coverage policies, you probably know that they are typically financed through mutual funds. And if the funds increase, so will the cash value of your policy, which will definitely be a nice feature for you and your family.

4. Some policies allow you to skip premium payments.
Some types of universal insurance policies will allow you to skip a certain amount of premium payments after a specified period of time. And when facing financial hardships it may be wise to use that option. Such policies aren't typically associated with cheap life insurance options but in the long run you get more benefits when using them.

5. Lower the coverage amount to reduce the premiums.
The premiums you will pay are directly related to the amount of coverage carried by your policy. If you lower the coverage amounts your premiums will go down respectively. However, keep in mind that reducing the coverage amounts below a certain point will make your policy senseless, because it won't be able to meet your insurance needs when the moment comes. Define the minimum required amount of benefits to be received and go on from there.

6. Finding good life insurance quotes will be tough in case you cancel.
If you decide to cancel your current policy now and find another one after some time you may be surprised to find out that your rates will be much higher than with your initial policy. Insurance companies tend to give higher life insurance quotes to those who have cancelled their policies before end of term, and you will probably be older when getting the new policy - a factor that also strongly influences the final rates.

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© 2010 Ranjan Kumar

3 comments:

Anonymous said...

Hello. And Bye.

business interruption insurance said...

I have recently left my job and was planning to drop my insurance policy so as to overcome the financial crisis up to an extent. I don't have enough to pay out the premiums but after looking all the points that you have posted I think I should drop my plan. Thank you for stopping me doing a mistake by canceling the policy.

Adam said...

Many companies are offering their services for health insurance plan, but some of them are just scams. You should insure yourself in a company that is well known for its policies. There are many companies that target you until you sign up for the insurance plan, and leave you alone after you get registered with them. Sometimes, the hidden charges leave you alone between rocks as the insurance rates get increased and ultimately the benefits become meaningless in front of such a high rate. One can judge such kind of scams by asking the questions about life insurance carefully before availing any type of policy.