Adhil Shetty

People often end up buying insurance policies without due diligence. This may be because there’s a pushy insurance agent offering them dreams of "assured returns", or due to a last-minute need to save taxes, or because a product comes highly recommended by a relative. Once they buy the policy, they realise it does not align with their long-term interests and returns expectations. They may even find that the product does a poor job both as an insurance cover and as an investment.

If you happen to find yourself in a situation like this, here are five steps you can take to get yourself out of the misery.

Use the Free-look Period

Once you have bought a policy and realised that it’s not meant for you, you can use the free-look period. It’s a 15-day period mandated by the Insurance Regulatory and Development Authority of India (IRDAI) within which you can write to your policy provider telling that you wish to return the policy. You would be refunded the premium amount after deductions for the pro-rated period of insurance, medical costs and stamp duty.

Quitting Your Term Plan

Unless you have a ‘return of premium’ plan, term insurance plans do not come with the option of surrendering the policy. You either need to exit during the free-look period or lapse it by not paying the renewal premium if you have crossed the free-look period. There is no surrender value or maturity benefit associated with it.

Surrendering Your ULIP

If you are looking to exit a ULIP after holding it for a while either because your sum assured is not satisfactory or you are looking for better returns, you can surrender your policy. The premium and any returns generated would be refunded after deductions as per the terms of the policy. Make sure you read the policy clauses carefully before you initiate the process. Also, to ensure there is no discontinuity in coverage, purchase another policy and wait until you complete the waiting period before you exit your current policy.

Buy Additional Plans for More Coverage

If you think the sum assured in your policy is not adequate, you can purchase additional life insurance products without quitting the current plan. You can look for products that would supplement the sum assured and the benefits offered in the current policy.

Convert your Policy into a Paid-up Policy

You can convert your policy in to a paid-up policy in case you are not willing to pay additional premiums. So you get coverage even though you don’t pay a premium. Your policy continues to exist until maturity, with the benefits reduced proportionately as per the number of premiums you have paid. The number of minimum annual premium payments for endowment plans is three years and ULIPs is five years.

In the end, change or exit your life insurance policy only after assessing your current financial situation. You must do your research and make calculations before you make any move.