Ask Mint | Cancelling a plan? Do a loss-benefit analysis first

Ask Mint | Cancelling a plan? Do a loss-benefit analysis first

I am a 40-year-old man and have recently purchased an apartment worth Rs1 crore. I am confident that I will be able to service it with my present investments but what if something untoward happens to me? Is there a life insurance plan to insure the home loan? Should I go for it?

Your liability increases the moment you sign on a home loan, which makes it necessary for one to take a life insurance plan. This will help ensure that your loved ones keep living a peaceful life even if something untoward happens to you.

There are mortgage reducing term assurance plans that are designed to give the borrower a life cover equivalent to his outstanding home loan. With such plans, the objective is to introduce customized risk protection at an affordable price. The payment of EMIs (equated monthly instalments) progressively brings down the outstanding loan over the years and the insurance cover reduces correspondingly.

Thus, in the case of any unforeseen event, the insurance cover will ensure that your family will continue to enjoy the home you had worked hard for, and not be burdened with any loan liability. Thus, you ensure that you gift your family, a home and not a loan.

I am a 30-year-old man. I bought a money-back plan and I’m considering replacing this existing life insurance plan. Are there any risks in doing so?

When you buy an insurance policy, you have acted responsibly and in the interests of your family. Hence, it is not advisable to cancel plans that you have already bought.

However, if you do decide to cancel an existing plan, it is better to weigh the options carefully. You must know that cancelling existing plans may result in some financial loss to you.

Please evaluate the extent of such a financial loss and weigh it against the additional benefits of replacing it with a new plan.

Also, compare the new plans on price, guarantees available, and withdrawal options and if it is a money-back plan, then the amount and frequency of money-back instalments.

Most importantly, do not cancel any existing coverage until the new plan has been approved, paid for, and delivered to you.

Readers are welcome to write in with their queries to The questions will be answered by senior executives from leading insurance firms.

This week’s expert is Rajesh Relan, managing director, MetLife.