Disadvantages Of Cancelling Your ULIP

IndiaFirst Life
• 26 Sep, 2024

Unit Linked Insurance Plans (ULIPs) are popular investment-cum-insurance products. However, there might be situations where you consider cancelling your ULIP. For example, unforeseen financial emergencies might raise the need to access your ULIP investment prematurely. Similarly, you may feel your ULIP returns aren’t performing according to your expectations. At times, you may feel your financial goals have evolved, and a ULIP may no longer align with your current needs.

However, understanding the implications of cancelling a ULIP is crucial before you take the decision.

The downside of cancelling a ULIP

Primarily, policyholders ought to recognise that cancelling a ULIP plan is an important financial decision and should not be done for any insignificant reason.

Here’s a list of the disadvantages of cancelling your ULIP.

Losing out on long-term returns

While it may seem completely harmless in the moment, surrendering your ULIP may not be the best move for you. One of the most important reasons to consider is the potential of ULIPs to bear better yields in the long run. Additionally, surrender charges are levied if you cancel your ULIP before a specified period, typically reducing your returns. Use a ULIP returns calculator to estimate the potential returns you might forfeit.

Losing out on tax benefits

With a ULIP, you get to reap tax benefits on the premiums paid. Hence, the shorter the policy is held, the lesser the number of years you can earn tax exemptions.

Jeopardizing the future

Another reason why surrendering a ULIP may not be a good idea is that it could jeopardise the future of your loved ones. ULIPs also offer a life cover, which can benefit your family after you are gone. If you let go of this cover, you could put their future financial security at risk.

Alternatives to Cancelling

Partial Withdrawals

Instead of a complete cancellation, consider partial withdrawals if you need funds urgently. This way, the remaining investment continues to grow.

Fund Switching

If poor performance is the issue, switch your investment to better-performing funds within the ULIP.

Surrendering a ULIP, especially in the initial years, may seem tempting as the returns may not always be on the higher side. Remember that with the power of compounding, you are putting more into the plan as the years pass, and can therefore expect better returns. With the above understanding of the impact of cancellation on your ULIP investment and by exploring other alternative actions, you can make the best choice for your financial future.

Disclaimers:

Unit Linked Insurance Products are different from the traditional insurance products and are subject to risk factors. The Premium paid in unit-linked life insurance policies are subject to investment risks associated with capital markets and NAVs of the units may go up or down, based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. IndiaFirst Life Insurance Company Limited is only name of the Insurance Company and does not in any way indicate the quality of the contract, its future prospects, or returns. Please know the associated risks and the applicable charges from your Insurance Agent or the Intermediary or policy document issued by the Insurance Company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale.

IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North [C] Wing, Tower 4, Nesco IT Park, Nesco Center, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 1800 209 8700. Email Id:customer.first@indiafirstlife.com, Website :www.indiafirstlife.com, Fax No. +91226570600. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd. under license.

by IndiaFirst Life
Headquartered in Mumbai, IndiaFirst Life Insurance Company Limited (IndiaFirst Life), with a paid-up share capital of INR 754.37 crore, is one of the fastest growing private life insurers in India in terms of New Business IRP in Fiscal 2023. Our key differentiators are our simple, easy-to-understand products that are optimally priced. As of Sept 30, 2023, we offered 30 retail products, 13 group products along with six riders (across retail and group portfolios), along with policies under the PMJJBY scheme, catering to protection, savings, health and retirement needs of our customers, leveraging multiple distribution capabilities and augmenting various investment options. In all propositions under the categories of Participating Plans, Non-Participating Savings Plans, Non-Participating Protection Plans, Unit Linked Insurance Plans, Group Protection Plans, Corporate Funds Plans, Riders & PMJJBY form a complete suite of offerings that help our customers prepare for the certainties of life. Our products are easy to understand and optimally priced with a developed comprehensive risk management framework/policy.