Can an insurance policy be terminated early?

6

6pack

Luminary
I want to discontinue my HDFC and LIC policies. I thought of surrendering it but their policy is harsh for people who want to surrender. I saw other insurance providers terms and regulations regarding early surrender and they are no better too. So only choice is to bring down the coverage period from 25 yrs to 10 or something like that. Is this possible without paying anymore than what i have paid till now? I guess its called making a policy paid up. The coverage amount will reduce too most probably.

Why I want to surrender? Well I think its not right that these companies take a loan from us every year in thousands and pay back only the amount they took from us along with some extra thing called bonus which looks like some 5% or something. Hell, in 25 years that amount is like peanuts. I wonder if i can be able to buy a month of provisions for my family in that time with that useless amount. With everything in crores now, amount below 10 lacs looks like a bad joke.

And yeah, most of you will tell dont mix insurance with investment. I did that too when i was young and gullible and fell to those marketing gimmicks. That line is some marketing guys well laid out plan to lure stupid people to invest in his company. Its just like the saying - a diamond is a girls best friend. See the resemblance there?

So how do i go about reducing coverage years and exit early from these leech type of investment policies?
 
Whatever you do, take a term insurance policy first before cancelling any of these. What is the exact name of the LIC policy? Each policy has its own terms and conditions regarding cancellations or converting to paid up, etc.

Even I have one from LIC and I wanted to cancel it too. Last I checked the bonus/benefits were good enough to make me change my mind. Only pure term insurance policies from now on.
 
Which policy you holding from hdfc. Surrender terms are generally based on the type of policy in question. Its foolish to reduce the term and so that option you should completely rule out.
Tell me the name of the policy and prolly ill be able to guide ya a little better. I hope you havent taken a SAP. If so, thats gonna hurt for sure.
 
What harsh dude?

FIrst confirm whether 3 years or 5 years completed for your policy.AT first place which policy you hold.I am asking about hdfc.I dont have idea about lic working but i can confirm they are bunch of thugs.

Regarding lic my family had some policy for whose payment wasnt made after 1996(50k ard invested till than).This year my dad dig some paper and asked me to check whether any money comes out of it.I checked and i was happy that 31k amount coming from nowhere forgotten bag.Now the company is saying since 15 years passed away in feb 2011(i asked vi frnd in june 2011) money can only be given when my father touches 80 years(he is 62 right now) or to his widow if he is no more.
I Guess i need to shake some authority for this BS since i wont be getting any interest and they want to keep my money on their rolling terms.

For hdfc its simple just filled their surrender form and submit to their ISC centre in your city thats it.

Reason you can give is financial constraints like wife's marriage etc.:bleh:
 
Yeah i think it depends. In some cases you can withdraw it within after 3 or 5 years.

Do check if you have got it from a agent, in which case, you would have already lost money as commision to the agents.

I got ripped of 15k by these agents.
 
My HDFC policy is a pension plus life insurance scheme. I've already completed around 5 yrs of annual payment in that. The policy has a table where they show what minimum amount they will give in case of surrender. For 6 years, its some 35k and this is after not considering the 1st premium. At 10K+ premium a year, that's a bad deal. Bonus till now is just 9k.

LIC policy is Jeevan Anand i think. Bonus for that last time i checked was 35 or 40 per 1000 sum assured. I have already completed around 9-10 years of premium payments of around 19k in it for each year. Sum assured is 4.5 lac. Even in this, they wont give first premium, and the minimum amount insured is according to their calculations of bonuses etc. If bonus is [450000/1000 x40=18000] per year, then it would be around 1.6lacs as bonus till now. But there is some rule that they wont pay more than 50 or 75% of sum assured as bonus i think. Not sure of this. As far as possible i think they will try and loot people and give least possible amount.

And both policy i bought through agents. :(

Feeling the same about medical policy too. We just pay 5k per year from 10 yrs or so, and nothing's happened till now. Could have bought lot of hdd's or upgraded my pc, etc with that money.
 
Guys i dont think u folks quiet understand how this works..

6pack, a pension cant have a life cover, not possi come what may. its a marketing gimmick. Also pension is taxable whilst if there is a life cover attached, it will make ur policy tax free.

Most ulip plans cant be completely withdrawn post 5 yrs. I use the word Withdraw cause in this case a surrender is not even required. IRDA states regular pay as a compulsion to be mentioned in offer documents but every policy with its individual features allows a minimum pay. For eg till abt last 2 yrs the hdfc pension, endowment and youngstar were only minimum 3 pays with a reducing premium option too (eg first yr premium say 3 lacs with next 2 yrs min 10000 each and nothing after that). Now its a minimum 5 pay product

So guys read ur docs carefully and u will find ur answers in there itself or walk to an local office and ask someone senior who might have been in the system for sometime.
 
Is that hdfc unit link pension plan policy.

I don't know how you getting such reduce value if its the same considering you have made more than 60k payment.If possible try to get consolidated statement of same from start so that you can figure out whether it was wrong timing from part of company or the agent took you for ride with all charges.

Since you mentioned bonus i am sure its endowment policy and not ulip.

I also have similar investment in ulip(hdfc ulip pension plan) for which i have made 7 investments of 10k each and luckily i am getting 90k of the investment.I was also planning to get out of it but since market conditions are not favorable plus tax deduction which i took all will be nullified and i need to pay taxes on whole amount hence avoiding to move out right now.

I still could have continue but last year in middle i paid the premium amount but the investment was made in march just one day before due date of policy and than the share market were at peak hence i got less units on my value.In short company kept my money on their rolling which provided me less benefits.

Anyways considering your investment value i don't see any point continuing the same.Even almost same value might have given hope in another 4-5 years of investment going high.But in your case hope for another 7 years too looks doubtful.

After 5 years no surrender value charges but i am not sure about endownment .GO through document papers and decide.

Now regarding say that you paid 5k premium for medical and never used it.Well thats the worst thinking.Say this year you didnt paid that 5k and suddenly some emergency happens and around 1 or 2 lakh is the medical bill.Than what will be your thought.

You will say i should had paid this year and all my old premium too would had been count.Ill say not investing in ulip and endowment will be do.But dont stop medicalam.
 
^^^

dude seriously, i dont think you understand what these products are meant for and how to use them.

First of all, a ulip needs to be considered as a 20+ yr product. If u think otherwise, then ur in the wrong product category itself.

Secondly almost every ulip in india has a fund switch option. If exercised correctly, u will end up making more money than any mf in the country.

Im not saying that ulips are good or bad, but you need to first atleast understand how they work and how they can work for you. Really i dont think you have quiet understood how these plans can work for you and in that case you should clearly consider the obvious..

As far as everyone else on this post is concerned, all the comments that i have read above really doesnt tell me that there is a clarity on the respective product features and benefits. Understand that first and then take a call....

In the pension space, hdfc ulip pension plans r prolly 1 of the best that i have ever seen till date. They do cover every bit of ones requirement when it comes to a retirement plan..

ps:d understanding part kinda had to be done before making the purchase and not after but sigh, i guess its never too late..
 
^ Take this thread as an eyeopener and care to share your knowledge wealth amongst us guys here who dont know anything?

It would help new guys who are going to put their money into insurance or anything else too.

Say I feel its a burden to pay 19k towards my LIC policy every year or i cannot pay for coming 3-4 years in a stretch, then what strategy should i take?

Should i shorten the term? Or should i exit it?
 
6pack said:
Say I feel its a burden to pay 19k towards my LIC policy every year or i cannot pay for coming 3-4 years in a stretch, then what strategy should i take?
Should i shorten the term? Or should i exit it?
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Time to get the policy out and look at the fine print. That will tell you what the limitations are.

Why dont you post a short summary here, the exercise will make it clear what not to do. What to do is an open question :)
 
6pack first of all share the complete detail like policy name ,premium you pay ,amount it covers and also details like tenure of the policies and all.

Than give reasons why you want to stop and which policy you planning to stop or tune upto your need.
 
6pack.. start with what is it you needed out of the policy and what did u end up getting. 19k is a small amount which can be adjusted into your tax exemptions itself. So in short-sight there doesn't seem to be d need to take any drastic step.

Anyways like everyone above mentioned, do give details of ur policy and preferably ans d question in my first line.. That should help immensely for starters

For d general query, ill post my basic take on insurance a bit later. Like i mentioned earlier, im not too sure what kinda problems u guys are facing with your existing policies (i,e- wrong product, wrong info provided, lack of product knowledge, wrong type of policy etc etc)
 
sorry for posting the details here quite late.

Lic - Jeevan Anand with profits and accident cover



This is of hdfc personal pension plan having life cover.



Terms of surrender



AMount that might be given on surrender



To answer your questions,

what is it you needed out of the policy and what did u end up getting
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Well, to be honest I bought the policy after getting lost in the sales pitch. That was about 8-9 yrs back. Situation was different then when I didnt think how far my money would go. Now with inflation rising every month, frankly speaking I do not feel like blocking 19k a year in some dead thing which purposes to say its acting for me when in reality it does nothing. Life policies are sold on the very basis of making people fear death, and the only reason i can think of them doing this is cause people have gotten wiser over the years and feel that the 4-5% rate that is given at end of 20 yrs by govt is not justified. Its like blocking your life cover for 20 yrs for a measly 4%. Even a bank FD would give better returns than that over that time.

Also dont feel the need to keep any life insurance now. my belief is that once we invest properly in shares or mutual funds, then that money will end up actually being more helpfull than insurance policies over time. with a joint demat account, the shares can be sold as and when required instead of waiting for company to disburse the amount of their choice in their free time.

This is the same feeling towards the HDFC standard pension plan. Its just 2 lacs in cover over a period of 20 yrs. In 20 yrs, value of 2lacs + 4% = you guess.

Even if they give 4lacs which is 100% profit, how long would i be able to buy food or pay bills to live my old age life with that measly amount?

My plan is to kill all these useless stuff off and to invest them in bluechip shares/ mf's/ gold /silver etc in some proportion that will change over time depending on market. Most importantly I feel I can get better returns in that time compared to the measly guaranteed returns which the companies claim to give.
 
6pack said:
...

Also dont feel the need to keep any life insurance now. my belief is that once we invest properly in shares or mutual funds, then that money will end up actually being more helpfull than insurance policies over time. with a joint demat account, the shares can be sold as and when required instead of waiting for company to disburse the amount of their choice in their free time.
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you have a totally wrong understanding of what a "life insurance" means if you plan on achieving the same goals using "shares or mutual funds".

Investment (shares etc..) is for your own use while Life Insurance is for your dependents in case of your death.

The policies which you have now are a combination of insurance+investment, hence the returns. They were sold to you under the guise of insurance which is the case with almost all insurance agents. Same is the case with medical insurances.

You can skip life insurance if you have absolutely no dependents. If you are married, your spouse/children are dependents. If you are single your parents are. Even if they have their own sources of income, I'd consider them as dependents.

If you want a pure life insurance policy, find out about term policies. Every insurance provider has at least one of this type. This type of policy has the minimum premium for a specific cover. It is applicable only in case of death of the insured, and there are no bonuses, no cashbacks of any kind. You can find out the approx. rates for your case here.

Term Insurance - Compare Term Insurance plans of LIC, SBI, ICICI, AEGON, Kotak & others|Apnapaisa

keep "purpose" as Risk and "type" as term insurance. Other options vary individually.

Yearly premium rates for a 30 year Single Male living in Mumbai.

Insurance cover of 50 lacs for a period of 30 years.

Aviva Life Insurance - i Life - 4,550
ICICI Pru Life - iProtect - 6,783

MetLife - Met Protect - 6,949
Kotak Life - e-Term Plan/ e-Preferred Term Plan -6,783

Kotak Life - Term Plan/ Preferred Term Plan - 8,135
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This is how much an actual life insurance costs. These are the cheapest 5 rates from the above link, as the premium rises, additional benefits get added to the policy. Choose according to your requirements and ignore the "insurance adviser".

If you are planning to close out the earlier plans, I request you to consider the above options.
 
Bro, post details of the features of your hdfc plan. Forget the excel working. Around 2004-2008, hdfc plans have delivered more than blue chip or mid-cap mutual funds. i.e- 80% plus(yea you read that right).

It really comes down to the plan, investment philosophy and the way you manage the fund.

See, the thumb rule is to find a plan in the market with the lowest front and backend load. Front end load is the upfront charge taken and backend charges are mortality, fmc and applicable taxes.

Also go for vanilla ulips with fund management options. Keep the life cover to the lowest(life cover is required to make the plan tax free under 10(10(d).

Guys there r plenty of plans out there. Choosing the best one for you is the key.

ps: A word of caution.. pls dont compare a term cover to mfs etc in terms of returns and feasibility. Two completely different products for different purposes.
 
@6pack,

what exactly are your expectations from a life insurance policy? Did you read my earlier post? The policy mentioned there is a "Term cover policy". I am sure that is what edge111hussain means by "Two completely different products for different purposes."
 
I read a gist of ur plan and its quiet obvious mate, your plan is neither a term nor a unit linked plan.. This is the reason i was asking for a detailed salient feature list of the plan you have taken.

Because your plan falls under pension, you will neither get a lumsum on maturity and neither will you get the benefits of a ulip. What you should have bought is a unit linked pension plan. They seemed to have changed the names of the plans since their split with slic. Anyways the plan went by the name "hdfc slic unit linked pension or pension plus" (2 different plans).

I honestly dont like what ur plans offering. In your case you are better off with a term cover + market linked investments.

If ur investment would have been in a endowment or any other market linked plan, i would have asked you to hold on to your investment and use its features to your advantage.

HDFC unit linked are extremely good in terms of their flexibility. Wrong product mate....
 
^ oops sorry didn't read post 15. :ashamed:

you have a totally wrong understanding of what a "life insurance" means if you plan on achieving the same goals using "shares or mutual funds".

Investment (shares etc..) is for your own use while Life Insurance is for your dependents in case of your death.
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after reading it, i still have this to say. Life insurance you say is for dependents in case of death. ok. lets say i die in last year of my life cover, and my dependents get the 4.5lacs +bonus amount. problem is that, since they are dependents and may not be working, would that 5-6 lacs be enough for them to live their lives for next 2-3 years?

a family of 4 require atleast 10-15k per month to survive. inflation grows at more than 8% a year. in another 10 yrs the amount required for monthly expense would have gone up 10 time what it is now. if its 1lac per month, then 6 lacs would last them just 6 months. what sort of future do you think i would be leaving them then?

hope you get my point.

edge111hussain said:
I read a gist of ur plan and its quiet obvious mate, your plan is neither a term nor a unit linked plan.. This is the reason i was asking for a detailed salient feature list of the plan you have taken.

Because your plan falls under pension, you will neither get a lumsum on maturity and neither will you get the benefits of a ulip. What you should have bought is a unit linked pension plan. They seemed to have changed the names of the plans since their split with slic. Anyways the plan went by the name "hdfc slic unit linked pension or pension plus" (2 different plans).

I honestly dont like what ur plans offering. In your case you are better off with a term cover + market linked investments.

If ur investment would have been in a endowment or any other market linked plan, i would have asked you to hold on to your investment and use its features to your advantage.

HDFC unit linked are extremely good in terms of their flexibility. Wrong product mate....
Click to expand...

so its better to sell all of this i hope?
 
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