Spend, Save and Invest Smartly

How does one Surrender an Insurance Policy?

Do you have an Insurance policy.....??? If your answer is ‘NO’ you are at risk because life is the most uncertain thing in this world. Nobody can predict what is going to happen next moment, covering your life with an insurance policy can safe guard the life of your dependents in case of an uncertain event. After taking a policy, what if you feel that the benefits of the policy you have is not good or if you doesn’t have money to continue with the policy premium.....

Surrendering a Policy

Is there any solution to come out of this situation…..??? The answer is Yes. ..!!! Most insurance companies are offering an option called Policy Surrender. This option allows you to discontinue the policy before the completion of the term. The amount you are receiving after surrendering a policy is called Surrender Value. In other words Surrender Value is the sum of money an insurance company will pay to the policyholder in the event of his or her policy is voluntarily terminated before completion of term or the insured event occurs. This Surrender value is the savings component of most permanent life insurance policies, especially whole life insurance policies. Surrender Value is also known as "cash value" and "policyholder's equity".
Surrender of policy is not recommended because the surrender value would always be less than the actual fund value. Therefore retention of earlier policies and continuation of all policies without allowing them to lapse is the best strategy for continuing life insurance protection.

Things to remember when You Surrender a Insurance Policy

  • Some policies got higher charges like Fund Management charges, Premium allocation Charges, Policy Administration charges, etc. Surrender your policy only if you find that these charges are high in your policy
  • Premium of insurance policy increases according to age. Before surrendering a policy make sure that you will not end up in paying more for the new policy since your age is increased.
  • Always remember that surrender value would be less than the actual fund value.
  • Surrender a policy only when you have a number a small insurance policies
  • Before surrendering a policy, make sure that there is another investment option that will yield more returns.

How to Surrender an Insurance Policy

Generally people consider insurance as an investment than (mainly ULIPs) a risk cover. Honestly speaking insurance is not a good tool for investment, it carries a lot hidden charge. It is always better to invest in Mutual Fund or any other investment vehicle by taking a Term Insurance policy. Term insurance plan will give you life cover for a bigger amount with comparatively lower premium. If you're trying to get all your financial dealings in order and find that you have quite a few smaller insurance policies but don't need them all, you can consider cashing it. It is one place to get money quickly without unnecessary hassle. Have a good look at the value of the insurance before you surrender it. Surrender also has tax consequences that you don't have if it is paid after the end of the policy term.

  • Contact the life insurance company directly or through Customer Service Department
  • Request the life insurance surrender/termination documents.
  • Fill out the forms & Return to the Company
  • Destroy or return your original life insurance contract
  • Wait for the check

Contact the life insurance company directly or through Customer Service Department

Whenever you want to surrender an Insurance Policy, Contact the life insurance agent from whom you bought the policy. If that agent is not available, contact the insurance company's Customer Service Department. Call the company on the phone or write to them for Surrender forms. If you have a telephone number or local office nearby, it's best to go there and meet the concerned person.

Speak to the Concerned person regarding the Surrender

It is better to speak with someone personally rather than writing to them. This may help you to clarify all your doubts regarding surrender. Speak to a representative regarding borrowing from the policy.

Fill out the forms and Return it to the Company

This is an important step in surrendering a policy. Make sure you fill in the form properly, policy number and should be proper. A mistake may delays the surrendering process significantly; this will delay the issuing of check also. Make copies of everything, including the policy document, which should state the policy number, the sum assured and the insured.

Return your original life insurance contract

Once of the form is filled and other obligations are over, submit your original life insurance contract to the company. If you can't find the original policy document use duplicate policy document issued to you. Mail it to the company or give it to a local agent for surrender.

Wait for the check

Once if you finish with all these procedures, you are ready to receive money (cheque) from the company. Larger companies have websites where you can track the surrender of your policy. Sometimes, if it takes longer than they promise you, a call to the service center will help you to find out what the delay is.

If you held the life insurance policy for three years you could surrender it and get 30% of the premiums you paid in the second and the third year. You don’t get back any premium amount you have paid in the first year.

As per the latest reforms in the life insurance policies you now can get 30% of the premium you have paid even in the first year. You need to hold the life insurance policy for at least for 2 years before you can obtain a surrender value for this policy.

Insurance
Term Insurance