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Endowment Plan Termination: Factors To Consider Before Surrender

Endowment policies are significant at providing benefits of both savings and insurance policies. It is one of the best policies out there if you are looking to invest your money.

In today’s time, where everyday items, education, travel, and many other things are getting expensive, it tends to the monthly budgets of families. With time, the income levels and expenditure change, and you might find yourself in a situation where you cannot handle the premium of your endowment policy which might force you to go for a cancelation of the endowment policy. However, there are many complications and benefits you would be losing out on if you surrender an endowment policy. 

What is an Endowment Policy?

A life insurance policy and a savings account are combined in an endowment policy. Individuals choose how much money they want to save monthly and pay their premiums for the endowment policy accordingly. As they make payments, the endowment develops in size, and when the insurance matures, or the policyholder dies, the whole endowment is handed out to them.

As they make payments, the endowment develops in size, and when the insurance matures, or the policyholder dies, the whole endowment is handed out to them. Endowment policies have multiple policies, ranging from typical plans to endowment plans that help you save for a specific objective, such as retirement or school. Some companies also provide yearly cash distributions, which might be beneficial if you need extra money.

Surrendering the Policy

If someone stops paying the premium of their endowment policy plan or cancels the policy before it reaches its maturity, the person will receive a sum of the amount which they have paid as premiums. The sum of the amount which they receive is known as ‘surrender value’. 

Things to Know Before Surrendering

The endowment plan benefits let you save your money regularly over some time. When the policy matures, you can avail the total amount of sum that you have invested/saved. If you choose to exit out of your endowment policy, the insurance company or provider through which you had bought the policy will put charges on the closure of the policy before your money is returned to you. 

When you surrender the endowment policy, you will still be eligible for that special surrender value. What surrender value means is the money that the insurance company or provider gives to an individual who surrenders the policy. However, you will only get guaranteed surrender value if you have paid 3 years of premium on the endowment policy. If you have paid any less than that, then you are not eligible for any kind of guaranteed surrender value. The surrender value that you will be receiving depends on –

  • Sum Assured amount of the endowment policy
  • Surrender Value Factor multiplier 
  • The amount of premium you have paid so far in the policy 


Other Things to Note –

  • Cover Of Insurance – When a policyholder decides to cancel their endowment policy, the insurance coverage value terminates instantly.
  • Tax Benefits – If someone has terminated or canceled their endowment policy, they are not eligible for any kind of tax benefit according to the Acts of Income Tax. It is very important to think twice or thrice before terminating your endowment policy. 
  • Chance Of Benefits – It would only make sense to surrender your endowment policy if you are getting better benefits and returns by making investments somewhere else in the market. Before going for other investments, it is very important to calculate the number of losses you will be facing when you cancel your endowment policy.

Before canceling your endowment policy, it is important to consider all factors so that you can minimize your losses. You can even take the help of a financial agent before making a final decision on the surrender of the endowment policy. 

Paid Up Endowment Policy

You have two options when you are not getting what you have expected from an endowment policy, the first one is surrendering, and the second one is to stop paying the premiums of the endowment policy altogether. However, this is only achievable once you have paid premiums on an endowment policy for at least three years. The number of years will be determined by the conditions of your insurance. The specific number may be found in your policy paperwork. At the finish of the policy term, you will get a figure called the paid-up value, which will be less than the sum guaranteed.

Which Option to Go For 

It is recommended to cancel an endowment policy within two years after purchase before the three-year period ends. You will forfeit the whole premium you paid. You may, however, put the money saved into a better financial asset and establish a corpus.  

It will be best to surrender your endowment policy if there is still a long period before it matures. You will suffer setbacks. Most insurance providers or firms will provide a surrender value of just 30% of the entire amount you paid as a premium for the endowment policy close to the start date. Still, if you put the money into a high-performing investment vehicle rather than an endowment policy, you will be able to more than makeup for the losses you will face by surrendering the endowment policy. Furthermore, the surrender value of endowment insurance might increase over time based on how long it has been since you purchased it. The longer you hold the endowment policy, the bigger the percentage you receive as surrender value.


Unless it’s necessary due to your financial situation or you want to make investments somewhere else where you can reap more benefits, it is not recommended to surrender to your endowment policy. The endowment plan benefits outweigh its negatives, and you would be much better long term if you follow the endowment policy. If you are struggling to pay the premiums of your endowment policy, you might be able to get some help from the provider, you can explore other possible options you can take

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