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Terminating an Insurance policy, especially if it’s still in its early stages, can have several financial implications. Here’s what you could potentially lose by canceling your education policy:

1. Loss of Premiums Paid
Non-Refundable Premiums: In most cases, if you terminate the policy early, especially within the first few years, the premiums you’ve paid might not be refunded. This means that all the money you’ve invested in the policy so far could be lost.

2. Surrender Value
Low or No Surrender Value: If your policy has accumulated some cash value (the surrender value), you might be entitled to receive a portion of that amount when you terminate the policy. However, if the policy is still relatively new, the surrender value could be low or even non-existent, meaning you could lose most of your investment.

3. Loss of Future Benefits
No Payout for Education: The primary purpose of the education policy is to provide a lump sum or regular payouts for your child’s education at a future date. By terminating the policy, you forfeit these future benefits, potentially impacting your ability to finance your child’s education.

4. Penalties and Fees
Termination Fees: Some insurance companies charge a fee for early termination of the policy. This fee is often deducted from any surrender value or may be an additional out-of-pocket expense.
Missed Bonuses or Additional Benefits: If your policy includes bonuses, loyalty additions, or any other benefits that are paid out over time, you might lose these as well.

5. Tax Implications

Tax Deductions: If you’ve been claiming tax deductions on the premiums paid for this policy, you may lose out on future tax benefits. Additionally, depending on your jurisdiction, any payout from the surrender value could be taxable.

6. Emotional Impact
Impact on Child’s Future: Beyond the financial aspects, consider the potential emotional and practical impact on your child’s future. If this policy was a key part of your financial plan for your child’s education, terminating it might leave you with fewer options to support their educational needs.

7. Alternative Solutions
Transferring Ownership: Instead of terminating the policy, you might want to consider transferring ownership to someone else, such as a trusted family member. This way, the policy can continue to provide benefits without reminding you of your past relationship.
Changing Beneficiaries: You can also change the beneficiaries or remove any references to your ex-spouse if that’s the concern.

NB:

While it’s understandable that you want to move on from anything associated with your divorce, terminating an education policy can lead to significant financial losses. Before making a final decision, it’s advisable to consult with your insurance agent or financial advisor. They can provide detailed information about the specific terms of your policy and help you explore alternatives that align with your current needs without losing the value you’ve already invested.

“At Tamaras Financial Planning and Consultancy, we are your reliable, friendly, and professional senior financial advisors. We provide tailored financial solutions to meet your unique needs—from humble beginnings to securing a wealthy financial future. Trust us to guide you every step of the way.”

S. Tamara Were
Your Senior Financial Advisor
Tamaras Financial Planning and Consultancy
📞: +254 722675977
✉️: info@tamaras.co.ke
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