An impressive sales pitch laced with exaggerated claims of returns can make anyone fall for the unwanted products or services.
Premium amount and market-based returns are still a jargon for a layman, which is why life insurance policies rank top among the most mis-sold policies.
Though policy buyers often get a window in the form of ‘free look-in period’, but there are still many who have lost this window of opportunity as well to exit from the policies.
Let the policy lapse:
Most of the policies, excluding unit-linked investment plans (ULIPs), can be discontinued if the premium payment is stopped within the three years of buying a policy.
This is the easiest way to lose a bad policy. However, once the policy lapses, the policy holder has no right to claim sum assured and the risk cover also comes to an end.
Surrendering the policy:
Traditional policies can be surrendered if the premium is paid for at least three years. The policy holder is entitled to receive a cash value in lieu of the premiums paid against the policy.
For ULIPs, the surrendering of policy is possible only after the completion of five years. Since insurers levy charges on surrender, therefore, it is not always a good option to discontinue a policy.
Converting into Paid-Up Value:
Instead of surrendering a policy, policy holders can convert their policies into paid-up policies.
The premium paid till the minimum stipulated period, which is three years for traditional policies, will continue to cover risk but for a reduced sum assured.
Such an option comes handy for policies, the premium for which has been paid for a considerable higher number of years.
Loan against policy:
Another judicious use of mis-sold policies can be through taking a loan against it. One has to take care that the interest on loan does not exceed the return on the policy.
Premium payments can be made through such loan, and the policy can be liquidated on maturity.
The idea for taking a loan against a policy is that the returns provided by the policies will compensate the interest costs of the loan.
Curated from How to exit mis-sold or unwanted Insurance policies?