I have only recently understood the importance of term insurance - but in my opinion it is quite late for me - with retirement nearing within a year. I did make the mistake of buying Max Life whole life participating policy. Also have some ULIPs which I have stopped paying and intend withdrawing soon. I have no other liabilities. Should I continue with this Max WLPP or go in for a fresh term cover?
- K Sanjay Simha
You need life insurance cover till you retire or until your family is financially dependant on you. In your case, you do not necessarily need a life insurance cover as you have no liabilities or financial dependants. So you need not buy any further life insurance cover.
Both the traditional participating whole life insurance plan (Max Life) & ULIPs are investment linked insurance plans. These plans are neither good investments nor do they give sufficient insurance cover. The traditional whole life policies do not generally beat inflation (even with bonus additions). Discontinue these two policies and curb your future losses. You may contact your insurer to get the surrender value and the paid up value of your whole life policy, compare the two values with bank deposit returns to take an informed decision. The surrender value of ULIPs will be the fund value as on the date of surrender. If you have completed the lock in period then there will be no surrender charges applicable on your ULIPs.
In future, do not buy insurance products for investment. After retirement, depending on your risk tolerance and your pension income, you can either opt for Monthly Income Plan of mutual funds or government backed schemes like Senior Citizen Savings Scheme (SCSS), Post office Monthly Income Scheme (POMIS) for a regular income. These schemes have capital protection and fixed rate of interest.
This article was originally published on May 23, 2016.
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