You must have heard multiple times that having a life insurance policy is extremely important. This holds even more prominence if you are the family’s sole breadwinner. But what is life insurance? Simply put, a life insurance policy is a tool that can help safeguard the future of your loved ones in case of your untimely death.
You put much effort into finding the best term insurance policy in India that suits your requirements and budget. But what if you had to sell it before expiry? While selling or cashing your life insurance policy is discouraged, as it can severely impact your entire financial plan, certain situations may arise where you are not left with much other option than exercising this one.
In this blog, we will explore all the aspects of selling your life insurance in India.
When is it Right to Sell Your Life Insurance?
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At the Time of Financial Hardships
Sometimes, you struggle with funding important financial goals, or there is a financial strain on you and your family. At such times, selling your policy makes sense because it may be the only resort to release you from all financial pressures.
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When There Is a Change in Circumstances
There are chances that your life circumstances have changed, such as getting a divorce, a change in nominees, an improvement in your health since the purchase, or a decrease in financial responsibilities may prompt a re-evaluation of your needs. This means you might have to rethink your life insurance purchases.
Process to Sell Your Life Insurance
You can choose to sell your insurance policy to a third party or the insurance company in a few ways. Understanding the nuances of these processes is critical for informed decision-making.
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Life Settlement
This way of selling your life insurance includes a company that specialises in life insurance purchases. The company purchases your policy, and the ownership of the policy changes, making this company the primary nominee of your insurance policy. This cash-out settlement benefits both parties because the initial policyholder gains monetary benefits, and the latter receives the sum assured.
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Viatical Settlement
If a policyholder is diagnosed with a critical illness or a terminal illness, the policyholder can sell the insurance policy to a third party with the help of a broker. In this type of settlement, the initial policyholder receives the payout immediately. However, the settlement is done for less than the actual death benefit. This also benefits the purchaser because, after the policyholder’s death, they receive the entire death benefit.
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Cash Surrender Settlement or Complete Withdrawal
When the policyholder surrenders, meaning gives the policy to the policy provider itself, it is called cash surrendering. The company will evaluate the policy’s current cash value, deduct any surrender charges from the amount, and pay out the final amount to the policyholder.
Conclusion
Selling your life insurance is an important decision that can significantly change your life. Life insurance is not just any financial instrument; it guarantees that your family will be financially safeguarded after your demise, so the decision is also challenging. If there are such circumstances in your life that you have to sell your policy, analysing the entire situation throughout becomes paramount. Your decision will shape the future financial crisis in your life, so make an informed decision.
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