Surrendering a policy: When should you do it — and should you at all? | Explained News,The Indian Express
Individuals must look at the reason for surrender — whether they need the money or they think they can't make future premium payments — and accordingly make their decision.
Friday, Aug 26, 2022
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HomeExplainedSurrendering a policy: When should you do it — and should you at all?
Surrendering a policy: When should you do it — and should you at all?
Individuals must look at the reason for surrender — whether they need the money or they think they can't make future premium payments — and accordingly make their decision.
Written by Sandeep Singh
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New Delhi | Updated: August 26, 2022 7:13:03 am
It is ironical that at a time when one is in desperate need of his/ her money, while surrendering a traditional policy (endowment or money back), policyholders in the majority of cases end up with a surrender value that is even lower than the premiums paid.As the pandemic hit lives, the economy, and livelihoods, 2021-22 witnessed a sharp spike in insurance policies being surrendered ahead of their maturity. Data show that more than 2.3 crore life insurance policies were surrendered during the year — more than three times the number of policies (69.78 lakh) surrendered in 2020-21.
It is ironical that at a time when one is in desperate need of his/ her money, while surrendering a traditional policy (endowment or money back), policyholders in the majority of cases end up with a surrender value that is even lower than the premiums paid.
In case of unit-linked plans, it may result in lower returns on the capital investment. It is, therefore, very important to understand the pitfalls of surrendering, and to evaluate all options before you decide to do so.
What should you look for before surrendering your policy?
The first thing that one needs to check is the surrender value. “Often, people don’t check the surrender value, and assume that the current value of the policy is what they will get if they surrender. It is only later that they realise that what they have received is much less than the current value. So one must check the surrender value before taking the decision,” said Surya Bhatia, founder, AM Unicorn Professional.
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