Surrendering Life Insurance Policy: Here is what you should know
A life insurance policy allows you to provide maximum protection for your family when you are not alive. While buying a life insurance plan, you should consider certain things in mind that will help meet the exact needs. The life insurance policies involve different types, and you should evaluate them in detail to help you choose the right one. In addition, they should cater to your needs and budget that gives ways to gain more advantages.
Sometimes, you may think that a life insurance policy is not suitable for your life when it comes to certain strings. In such cases, you can terminate your policy that will save more money. However, it would be best to consider some important things when you want to surrender your policy. This will help a lot to overcome disputes and other problems significantly. Therefore, you should follow certain guidelines on how to surrender your life insurance policy from various sources.
What does it mean to surrender your life insurance policy?
You should know what policy surrender is while buying a policy from an insurer. Simply put, it refers to the termination of a plan when you don’t want to pay premium amounts anymore. The process is relatively simple, depending on the policy type you have. It involves notifying your insurer by submitting the necessary form along with documents before the maturity period.
Do you know what the surrender value is?
You should know what is the meaning of surrender value when you want to terminate your plan. A surrender value refers to a portion of the amount offered by an insurer on the paid premium after deducting applicable charges. First, however, make sure that you have completed the lock-in period successfully to get back the surrender value. Surrender value occurs in policies that come with a saving or investment component. For example, the pure life term insurance plans or term plans will not acquire any surrender value except single and limited premium plans, whereas policies like endowment policy, money back, and ULIP have a surrender value.
You should have paid the premiums for at least 2 years when the policy tenure is less than 10 years. If you have taken a plan with a tenure of more than 3 years, ensure that you have the premiums for at least 3 years.
Know more about the types of surrender values
Before terminating your life insurance policies, you should know more about the types of surrender values in detail. This, in turn, gives ways to receive the amounts without any difficulties.
A guaranteed value is payable by an insurer after the completion of 3 years. It is 30% of the premiums paid and excludes the premiums for the first year. Not only that, it even excludes any additional premium amounts paid for the riders and bonuses paid by an insurer.
You should also know the special surrender value of a life insurance policy. It is usually higher than a guaranteed value. Your insurer will calculate the value based on the surrender value factor after 3 years with the original sum assured amount with the number of premiums paid and the number of premiums payable. Moreover, your insurance company will also include the bonus accumulated while calculating the value.
It would help if you understood the difference between two surrender values before canceling your life insurance policy.
What are surrender fees?
Your insurance company will take some fees while surrendering your insurance plan, and you will receive the remaining amount after the deductions. Therefore, you should evaluate the fees in detail while surrendering a policy.
How to surrender your life insurance policy?
You should know how to surrender a life insurance policy in simple steps that will help meet the essential needs. Here are some steps you should follow while surrendering your plan.
- Contact your insurer first: You should contact your insurer first when terminating your policy. You can visit the insurance company’s office in person for this purpose. It will provide you with a policy surrender form and you should fill the same with important details. Furthermore, you can even send the application form through email after downloading it.
- Take a copy of the application form for reference purposes: In the second step, you need to take a copy of the policy surrender application form for recordkeeping purposes. It will help you to use the same for reference purposes in case of any disputes and problems.
- Store a mail copy: If you are sending the surrender form through email, then ensure that you store the receipt with a copy of the form.
- Submit your documents properly: While terminating your life insurance policy, you should submit documents properly along with a canceled cheque. You need to attest your documents and mention the valid reasons for surrendering a policy. Check your documents once or twice during the submission process to get approval from your insurer as soon as possible to gain more benefits.
Is surrendering your policy the right choice?
By surrendering your life insurance policy, you will lose out on all the benefits. Also, you will get a much lower amount than the premiums already. If you have a ULIP plan, you lose a large amount of premium paid in the initial years. Hence, it is wise for you to surrender only the endowment policy because you can invest the received amount in other things. It would help if you thought once or twice before surrendering your value. It would be best to consider your family before surrendering your policy that will help ensure high protection. Furthermore, not all policies will come with a surrender value, and you make the right decision.
Use your surrender value wisely
You should know how to use the surrender benefit wisely that will help generate high income. Besides that, you can consult with financial experts for this purpose that give ways to invest money depending on your needs. You should read the terms and conditions of a policy before buying. Read the cancellation policies thoroughly while investing money that will help experience peace of mind.