When to Surrender Insurance Policy | Reasons to Surrender

When to Surrender a Insurance Policy? At times you must have felt in many situations to get rid of something that you’ve got and free yourself from it instead of maintaining it. This view might be applicable on your land that you have purchased, car that you are having and even to your insurance policies. Take a look at all the insurance policies that you have and see whether it is being useful in the current situation for your future benefits? If you have invested in such policies, whether that investment is giving you proper returns?

Reasons to Surrender a Insurance Policy

Reasons to Surrender a Policy

If you shift yourself from these investment options to other schemes like mutual fund or PPF – will it give you more returns? Only based on the answers to these 3 above questions you can decide whether to surrender your insurance policy or not.

Why to Surrender an Insurance Policy?

Why are we surrendering a policy? It could be due the reason that the policy might not be suitable for our need or we are facing loss/trouble to pay a huge sum of policy amount or the income is less to meet out the expenses. Only any of these situation forces us to surrender an insurance policy.

Knowingly or unknowingly that you have taken an insurance policy and at the time of surrendering it, five major questions should be raised and find out the answers. Here are those five questions:

  • How much you will get if you surrender the policy now?
  • How much is the surrender charge?
  • Is there any chance for the surrender charge to come down if you wait for few more months?
  • Instead of surrendering the policy if you change it to “Paid Off Policy”, how much you’ll be getting on its maturity?
  • By surrendering this policy, how much are you losing in the “life insurance coverage amount”? To equalize this are you taking any term-insurance to your need?
  • If you have decided that it is correct to surrender the policy after answering all the above questions to yourself then where to invest the amount that you’ll be getting through this policy surrender?

  • If the policy you have surrendered was a ULIP scheme based, then the surrendered amount can be invested in good mutual fund schemes. Only then you can overcome (as the market grows) from the loss faced due to the downfall in the share market.
  • If you have surrendered a long-term policy then the surrendered amount can be invested in PPF like schemes.
  • While surrendering the policy taken to save the income tax, you can invest the tax-saving investment into PPF or in ELSS schemes which is a share market based saving scheme that gives you tax saving benefits too.
  • Other Situations to Surrender a Policy

  • After retirement you want to surrender your term-insurance policy. After retirement the life-cover may not be needed.
  • The term-insurance policy taken already through an agent can be surrendered after taking another online term insurance policy though you may not get any amount. This is because the online term policies have 50% lesser premium than the policies taken through agents.
  • If you have taken a policy equaling to the loan that you have availed and when you are foreclosing the loan – the term policy can be surrendered. Want to know what to do if you face loss while surrendering the policy? Just read the first line of this article again.
  • Before deciding to surrender a policy, consider reviewing all the above questions to be firm on your decision. When to surrender a insurance policy purely depends on an individual’s choice and decision based on the above factors including personal factors too. However, largely, these are all the common reasons to surrender a policy.