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Ref. No. KLI/22-23/E-BB/492
You must start the process of surrender term insurance policy through your insurance service provider. For more information, read blog or visit website.
You buy a term insurance policy when you have specific responsibilities like providing for your family or paying off a home loan. And leaving behind a lump sum amount is an excellent way to secure your family financially without burdening them. But what should you do with an insurance policy when you have zero liabilities? A surrender term life insurance policy is the most reasonable option. Read further to know if surrendering your term policy is the best option and, if not, then why you should stick to it.
You must make every effort to pay your premiums on time when you buy a term insurance policy. Your insurance will be automatically canceled or forfeited if you miss a payment. You won’t have any immediate financial consequences, but you’ll lose the life insurance your policy offers. You risk leaving your family without any financial support if you don’t have this important insurance.
If you do decide to surrender term life insurance policy, you’ll probably pay far more money to buy new coverage later. Keep in mind that your premiums will depend on your age and health. Today’s term insurance policies also typically include a maturity reward, like a refund of premiums. The maturity benefit will be forfeited if you relinquish your insurance.
Although giving up your coverage can seem like a smart move at the time, doing so could hurt your finances in the long run. Some people worry that their term insurance will expire. You shouldn’t worry, though. Before the maturity date, you can always change your term insurance plan into a standard life insurance policy.
Paying hefty premiums may seem like a waste if you have no liabilities. The money paid towards premiums can be used for a better cause. But the policy cannot be surrendered if you have a pure-term insurance plan. Insurance policies with an investment or savings component are the only type of term plans which can surrender. So, if you are sure there is no requirement for a death benefit, then surrendering the policy should be the way to go
Surrender Value is the money you receive on voluntary exit from your life insurance plan before the maturity date. Insurers pay the sum from the earnings on your premium portions allocated towards savings. Policies acquire term insurance surrender value after you pay the premiums for some time.
Term plans are pure protection plans without any savings component. Hence, regular-term insurance policies usually have no term insurance surrender value.
Consider paying Rs. 15,000 each year for an amount assured of Rs. 3 lakh throughout the course of a 20-year policy. After the fourth year, you ceased making premium payments. If the bonus is Rs. 30,000 and the value factor is 30% in this instance, the paid-up value will be equivalent to Rs. 60,000, and the special surrender value will be equal to (60,000+30,000) x (30/100), which is Rs. 27,000.
However, Kotak Life limited-pay and single-pay e-term plans accrue term insurance surrender value after you pay the premium for a specified period. The amounts you get on surrendering such policies depend upon the premium paid and the remaining policy term. Surrender charges apply.
When you buy life insurance, you can exit the policy before maturity if you wish to. However, in return for exiting the policy, you get some money, which is the policy’s surrender value. As previously mentioned, term plans need investment or savings components like Unit-Linked Insurance Plans (ULIP) have a term insurance surrender value.
Every company has a set period after which you can surrender the plan, which you cannot do immediately after buying the plan. The set period also depends on your policy term and the years you have completed after buying the policy. The amount received after surrendering the insurance plan attracts income tax and other charges if you have availed of a loan against the policy.
You must start the process of surrender term insurance policy through your insurance service provider. Following that, the insurer will determine the surrender value that will be paid to you. The surrender value of the policy will be less than the premiums you have already paid. Can a term life insurance policy be surrendered? You can, indeed! But as a result, the policy’s value will inevitably fall.
The cash term insurance surrender value refers to the amount that the insurance provider gives you once you return the policy. If the covered event occurs prior to the policy’s maturity and the insurance coverage is terminated voluntarily, this clause applies. A guaranteed surrender value, which is the sum that is guaranteed to the policyholder in the event that the policy is canceled voluntarily before maturity, is offered with a number of products. But there is a fee for giving up before maturity.
The surrender value for the policy is set by the Insurance Regulatory and Development Authority of India (IRDAI) during the first seven years. The surrender value is determined by the insurance company starting in the seventh year but only after consultation with the policy regulator.
The surrender value decreases by up to 50% between the fourth and seventh years; starting in the third year, the surrender policy is up to 30% of the paid premium. The general rule is that the amount you receive on the closure will be bigger the closer you are to your date of maturity at the time of your leave.
To find out the precise surrender value of your term insurance policy, it is essential to contact the insurance provider.
Your family may be financially stable at the moment and capable of looking after themselves, but tomorrow’s situation is still unknown. A financial need could arise at any time leading your family to become dependent to make ends meet. To secure your spouse’s and children’s future, receiving a death benefit would help them stabilize their financial condition.
There is always a chance of getting a critical illness without a connection to heredity or lifestyle. In addition, treatments for many critical illnesses can cost a lot which doesn’t go easy on any family. Choosing the right plan would aid in paying off the medical expenses and getting you the right therapy.
You may not have any loans to your name, but your spouse or children could end up taking one. The sum assured would make it easy for them to pay it off without burning their savings. This could also hold if you were to take a loan due to an emergency but could not pay it ultimately. Then, your family would have to bear the financial burden of paying it off.
In this plan, the life cover amount decreases as the policy term expiry date draws near. The premiums for such policies are usually lower than regular term plans. Thus, you need not bear the burden of excess premiums for coverage you do not need. Yet, your loved ones remain secure against financial hardships in case of an eventuality.
It refunds the total premium you pay throughout the policy term when the plan tenure ends. Thus, the plan shields your family against life’s uncertainties. It also provides a survival benefit by returning your invested sum. Hence, your premium spends are fruitful.
FAQs
If you have no unpaid loans or financial dependents, you may not want to continue paying your term insurance premiums. But in future, the need for life insurance might resurface. So if you want to keep your loved ones’ financial future secure for the long term, term insurance is essential.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
