Life Insurance

Want to surrender your Insurance Policy? Here's a guide

I give you four reasons for not to surrender your policy

  • Your life insurance cover stops.
  • You have to pay tax on your surrender value.
  • You lose opportunity to grow your money.
  • Your new insurance policy cover will cost your more.

Know all about Surrender Value of your policy

What’s surrender value?

When you do not want to pay the future  premiums due and discontinue with your insurance  policy  then the insurance company pays you back a part of the total of all the premiums paid and also deduct some charges. This money paid is surrender value of your policy. 

Do I get surrender value in all life policieS?

No, It is available only in traditional plans like Endowment , Money back as well as ULIPS where there is a component of investment along with insurance premium.But Term insurance does not get surrender value.

Does surrender value add if I stop paying the premium?

No. The surrender value becomes available only if you have paid the premiums for 2 years continuously since start of the policy (if your premium paying term is less than 10 years) and it is 3 years if the premium paying term is more than 10 years. But if you surrender before this no money is paid to you.

What if I stop paying the premium but continue with insurance?.

Yes, but the risk cover will get reduced and that too only if you have paid for 2/3 years.

How much money will I get back in traditional plans?

If you fulfil the requirement of having paid premium for 2/3 years then there are 2 types of surrender value that are there:
a) Guaranteed surrender value: You are guaranteed a fixed percentage of premiums paid depending on when you surrender.
  • If you close after 2/3 years, you will be ensured 30% of premiums paid.
  • If you close between 4 and 7 years, you will get 50% of premiums paid.
  • If you surrender in the last two policy years, you can get up to 90% of premiums.
b) Special surrender value: This surrender value depends on the sum assured, bonuses, policy term and premiums paid.

How much money will I get back in Ulips?

Before lock-in period: If you stop paying the premium before five years, the policy will lapse. After deducting some charges the remaining fund value will move to Discontinuance Fund, where it will earn 3.5% till five years, when you get the total amount.
After lock-in period: No charges are levied and you can get back the fund value.

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