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Is Postal Life Insurance good?

You should discontinue this policy and curb your future losses

I want to surrender my Postal Life Insurance which I've had for 2 years with an annual premium of Rs. 20,000. Is it a good plan?
-Chanchal Chatterjee

Postal Life Insurance doesn't offer term plans. This means it is an insurance plan that comes with maturity benefit. These insurances can be surrendered only after completion of 3 years and in your case since you haven't completed the 3 year period, you will not have the option to surrender it. We do not recommend endowment policies for insurance purpose. You should keep your insurance and investments needs separate. The only kind of life insurance that makes sense is term insurance because only in that case you are insuring purely against a risk. The moment you buy any other kind of insurance which promises a lumpsum repayment at the end of term, you are actually making an investment that is disguised as insurance. Such policies are expensive, provide you with little life cover, and the investment part offers moderate returns despite decades-long lock-in.

In our opinion, you should discontinue this insurance policy. Please note you will not get anything in return upon surrendering your insurance policy before three years. That means you will stand to lose Rs 40,000 that you have paid in first two premiums. However, it's better to incur that loss because if you pay the premium for the third year as well and then surrender the surrender value will be less than the 3rd year's premium. Therefore it is better to let your policy lapse and forgo the paid premiums.
The way to go about it is to calculate how much cover you need and then find a good, low-cost, term insurance. The premiums for a term insurance will only be a fraction of the premium that you will pay for policies like postal life insurance.

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