‘Not all advice is good advice.’ Financial planners may be correct, but not always. Hard-pressed financial advice can lead to buying the wrong life insurance policies, which can be more expensive and less valuable, leading to surrendering the policy and investing elsewhere. But is it the right thing to do? Let us dig deep and discover when you should surrender your life insurance.
Surrendering life insurance means you no longer want the insurance company's services. In this situation, the contract is terminated and you will be paid out the policy's surrender value. The procedure may be fairly simple depending on your policy type and whether it includes a cash value or investment component.
What is a Surrender Value?
Life insurance is a long-term commitment, and there may be times when you must surrender your policy. So, if you surrender a policy in the middle of its term, you will receive a sum (surrender value) equal to the amount allocated to savings and earnings. Surrender value is the amount received by a policyholder from a life insurer when he or she decides to cancel a policy before its maturity period. Usually, when people are tired of paying the life insurance premium, they tend to surrender the policy.
You cannot surrender the plan right away after purchasing it; instead, each term insurance company has a specific time frame after which you can do so. The set period is also influenced by the policy's length and the years that have passed since the policy's purchase.
How to Calculate Your Life Insurance Surrender Value
The ideal way to calculate is by using the surrender value calculator. You can use the surrender value calculator on an insurance company's website. To instantly determine the surrender value, you must provide basic information like policy and personal details. The surrender value calculator will calculate your policy's surrender value as soon as you submit the necessary information.
Do You Need to Surrender Your life insurance policy?
You might decide to stop paying your life insurance premiums if you have no unpaid debts or dependents who require financial support. However, the demand for life insurance could return in the future. Consequently, term insurance is crucial if you want to ensure the long-term financial security of your loved ones. Though it is a decision that depends on your personal circumstances, it is crucial to understand whether you will gain from it or not.
Things to Ensure Before You Surrender Your Policy
You may have no unpaid debts. However, it's still possible that your family still relies on you for financial support. They will require your life insurance in the unfortunate event that something happens to pay for their living expenses. If you decide to cancel your term insurance, ensure that your other life insurance and investment returns will cover these costs.
A term plan replaces the family’s single income generator. In an emergency, the payouts would care for their dependents. Examine your nominee's financial independence to avoid financial hardship without your life insurance benefits. This will help you make an informed decision.
How to Surrender Your Policy
The typical steps you'll take to cancel your life insurance policy are as follows, though they may differ slightly depending on the provider:
- Fill out the surrender form and request the company to indicate your desire to cancel your insurance coverage.
- Send the form by mail to your insurance company, and keep a copy of it in the same place as the mail receipt. These records provide evidence that you filled out and mailed the form.
- Once the insurance company receives the request, they will move forward with it and cancel your policy.
Documents Required to Surrender Term Insurance Policy:
- Surrender Form
- ID Proof
- Original Policy Document
- Other Important Documents
Conclusion
Consider what other life insurance options you need to have in place before surrendering any policy, as well as any fees or other consequences, before starting the process. We hope that you will take a wise decision.