Insurance is a strategic way to protect ourselves financially against unforeseen events. Modern insurance products are tailored to help an individual to achieve his/her future financial goal along with insurance protection. Usually, we buy life insurance policies for longer periods say 15-20 yrs and there are some probabilities that insured person might be unable to pay the premiums or he/she might feel that current insurance policy does not meet with his/her insurance requirements. In such scenarios, policyholder may think to surrender existing insurance policy and replace it with a new one; that meets with his/her budget and future needs. In this post, we’ll be discussing on pros and cons of surrendering a Life Insurance policy and questions related to it.
FAQs on Insurance Policy Surrender-
Pros of surrendering a Life insurance policy
- Having excessive insurance cover does not make sense. By doing so, you are putting unnecessary burden on yourself; therefore, if you have more than one insurance policy and you think that you won’t need all of them then you can terminate policies that you think you don’t need.
- You may also think to cancel an insurance policy if it does not meet with your future goals.
Cons of surrendering a Life insurance policy
- Remember you only get saving portion of your policy commonly known as surrender value.
- You get surrender value after certain deductions such as; surrender charges and excluding first year premiums (in some policies).
- Remember not all policies offer surrender value. Only policies that have embedded saving components acquire surrender value or cash value.
Definition of surrender value or cash value
Definition of guaranteed surrender value
It is imposed by law that if premiums have been paid by policyholder for a specified period then there shall be a guaranteed surrender value; if policyholder fails to keep his/her policy contract in force.
Do all life insurance policies acquire surrender value?
Other options before surrendering a life insurance policy
How to calculate surrender value?
Can I get full premiums back?
Can I get surrender value if I have not paid premiums for specified period (say 3 years or 5 years)?
How do I surrender a life insurance policy?
- Visit your insurer’s nearest branch and fill out the form to surrender a policy. Attach required documents; if asked in the form.
- You may visit your insurer’s website because nowadays many insurers offering online services to provide hassle free and convenient services.