Life insurance is one of the most vital aspects of your financial planning with a long-term objective of building a corpus. It also secures the interests of your family by providing you with life cover that will look into their financial stability in your absence. Considering that you buy a life insurance plan not solely for investment and tax rebates, but also as a tool to ensure the financial security of your family, the thought of surrendering a policy must be an extreme step and a matter of compulsion. You may contemplate surrender of your policy in the event of dire financial duress and to a lesser extent for opting a wrong policy and you wish to switch to a better one. Before going into the nitty-gritty of surrendering your policy, you first need to know the mechanism of life insurance plans and the other definitions pertaining to the business, to take an informed decision.
Meaning of life insurance:
A life insurance policy is a contract between you and the insurance company or provider. The contract envisages payment of settlement amount to your beneficiary in the sad event of your death, against regular payment of premium to the insurance company in terms of the life insurance plans chosen by you. In case you survive the tenure of insurance, you are promised guaranteed benefit on maturity. There are many types of life insurance plans in India, of which the core ones are called term life, whole life anduniversal life. Life insurance plansareoffered by a large number of providers for you to shop for plans that meet your specific needs, relative to your financial goal and budget.
Choose the best life insurance policy with high returns:
Among the wide bouquet of best life insurance policy in India, it is best that you focus on the core life insurance plans explained. You need to learn about the eight basic life insurance types to arrive at an informed decision as to which plan suits you best.
Life insurance plans terms defined:
Before you proceed to opt for a particular plan, you need to analyze the features thoroughly. To do so systematically, you need to be aware of the terminology at play:
Type of Life Insurance Plans:
Now that you are aware of the definitions of the different terms in use, it is important to know of the different types of life insurance policies on offer and the best insurance policy for investment. Typically life insurance policies are broadly classified into two: Term life andWhole life. Each type further has distinctive sub categories. They may be tabulated as:
Surrender of Life Insurance Plans Policy:
A situation may arise in your life when you are not in a position to pay the premium of your policy or are having second thoughts of opting life insurance plans which you feel is unsuitable and you intend to switch to a different one instead. In either of the cases, the surrender of your life insurance planspolicy will extract cost from you in the form of money paid to the insurer as premium. However, you should be clear in your mind that you can surrender your life insurance planspolicy only after payment of minimum of three premiums else you stand to forfeit the entire sum paid by you. Let us take a look at the procedure and other processes involved in surrendering your policy.
Effect of surrendering Life Insurance Plans Policy:
The effect of surrender of your life insurance policy is dependent on the type of policy you hold. The emerging scenario is:
premiums your coverage lapses.
Disadvantages of surrendering your Life Insurance Policy:
By surrendering your policy you are:
Surrender value of Life Insurance Policy:
When you surrender a life insurance plans policy before the completion of its full term, you are eligible to receive a part of the money paid by you minus the charges and other deductions, subject to extant rules. It is only applicable for policies that have saving component besides insurance. Therefore, while pure term plans are excluded, your traditional endowments, money-back or ULIPs will have a surrender value. There are two types of surrender value:
Paid-up value of Life insurance Policy:
When you stop paying premiums of your life insurance plans policy during its currency, it is automatically converted to a paid-up policy with reduced sum assured and death benefit.
Documents to surrender your Life Insurance Policy: You have to deposit all the relevant documents to your Insurer Branch Office where you hold the policy:
On submission of the relevant documents, the proceeds of the surrender value of your policy are transferred to your account within a reasonable time.
The purpose of insuring yourself through life insurance plans is to obtain risk cover and secure the financial future of your family. By surrendering your policy you are endangering the future security of your family. You receive surrender value if you have continued with the policy for a minimum period of three years. Yet is advisable that you refrain from doing so and if you must, only as a last resort.