What does commutation mean in funeral insurance?
Buying out funeral insurance is option if you want to cancel your funeral insurance.
Would you like to know more about buying out your current funeral insurance, what is involved and what are the main advantages and disadvantages? Below, all your questions will get a clear answer, so you are sure to make the right decision.
How can you buy out funeral insurance?
There are several methods available if you want to buy out your funeral insurance. Important to know, before we get into that, is that making a funeral insurance premium free is in some cases more advantageous than buying out or canceling the entire policy.
Why buy out funeral insurance?
There are several possible reasons to buy out funeral insurance, as you'll see below:
- As an insured person, you have another or even double insurance, which means you are overinsured. In this case, it is a good idea to compare both options to make an informed choice.
- Your wealth as an insured has increased to the extent that you easily cover any expenses with your own capital. In that case, funeral insurance is no longer necessary and it is even more advantageous to buy out your funeral insurance.
- You are experiencing financial difficulties and thus are no longer able to pay your monthly premium for funeral insurance. Buying out your current insurance is then a good short-term solution.
- You are not satisfied with the terms of your current funeral insurance policy and want to switch to another policy that better meets your expectations.
Of course, these are just some of the possible reasons for buying out funeral insurance. How exactly do you do that and what should you pay attention to?
What is the difference between commutation and cancellation?
Often confusion or ambiguity arises regarding the term "buying out a funeral insurance policy" and it is thought that there is a difference with canceling a funeral insurance policy.
However, both indicate the same thing. The reason people use the word "buyout" is because the policyholder pays a sum of money to the insurer if he or she cancels the policy early.
What are the pros and cons of buying out funeral insurance?
Below is a clear overview of the main advantages and disadvantages of buying out funeral insurance:
The benefits
- You can change insurers
Of course, if you buy out your current funeral insurance, you can look for another one that offers better terms for your personal situation and preferences without worry.
- You no longer pay a premium
When buying a funeral insurance policy, you are no longer stuck with the current monthly premium. This is advantageous if you have temporary financial difficulties, although in the long run it is of course better to take out funeral insurance.
- Redemption can be done at any time
Finally, buying out your funeral insurance is always possible, at any time. This means that even if you already have a funeral insurance policy, you can look for another one without any problems and cancel your current one right away.
The disadvantages
- Surrender value is usually high
The biggest disadvantage of buying out a funeral insurance policy is that the surrender value will likely be much less than the amount you are insured for as a policyholder.
Often that value is also lower than the premium already paid. That means the amount paid out to you probably won't be high enough to fund a funeral.
- You cannot buy out a funeral insurance policy with every policy
Finally, buying out a funeral insurance is only possible if you have a Capital Insurance. Have you opted for a Natura insurance? Then canceling your funeral insurance is not an option.