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Should I surrender my term insurance as I have no liabilities?

A term insurance plan acts as an income replacement tool when a family loses its prime earning member.

Jun 03, 2019, 11.14 AM IST
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If you have no liability, then you can stop paying the premium for the term policy.
I am 69, retired, earn a pension and have no liabilities. I had purchased a term insurance in 2012 with a cover of RS 20 lakh and tenure of 13 years. The annual premium is around Rs 41,000. My Section 80C deductions will be taken care of till June 2020 through home loan repayments. Should I do away with my insurance policy?

Raj Khosla, Founder and Managing Director, replies, "When a family loses its prime earner, a term insurance plan acts as an income replacement tool. As you have no liability, you can stop paying the premium for the term policy. To avail of the Section 80C benefit after June 2020, you can invest in other instruments such as post-office schemes or tax-saving funds, based on your liquidity needs and risk appetite."

I invested in Kotak Assured Income Plan in 2011 and have been paying a premium of Rs 1.5 lakh every year. The premium has to be paid for 15 years and the policy term is 30 years. I am 50 and I’ll earn an annual pension of Rs 1.5 lakh from this policy after I retire. Should I continue with it?

Raj Khosla, Founder and Managing Director, replies, "To reap investment benefits, you must hold the plan for at least 10 years. But it is recommended that you continue paying the premium till the policy term. You will get the assured income, only if the policy is in force and you survive the term. The policy may be surrendered (after 10 years) only if there is extreme liquidity crunch, or if you have plans to re-invest the surrender value in another product that can generate better returns."
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of
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