Sunday, 10 July 2016

How to Surrender an Insurance Policy


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Policyholders can surrender their policies if they have paid the premiums for three or five consecutive years from inception (For new ULIP policies, IRDA has increased the lock-in period from three years to five years). If policyholder fails to pay premiums for at least three or five consecutive years from inception then he/she may not be entitled to get surrender value or paid-up value.
Some policies offer surrender value at the end of lock-in period if policyholder stops paying premiums before the expiration of lock-in period.
In this post, we’ll be discussing how to surrender an insurance policy but before describing the procedure of policy surrender we advise you read pros and cons of surrendering a policy; because only a few reasons can justify policy surrender. In addition, we suggest you explore other options before doing so such as, change your policy into paid-up policy, take loan on your policy, and do partial withdrawal to fulfill your financial requirements etc.
Note: Most of experts of this field advise that premature withdrawal would not be good option for policyholders because by doing so they only get a small portion of their premiums.
Important:
Paid-up Value: If policyholder stops paying premiums after lock-in period but does not surrender policy then insurer converts his/her policy into paid-up policy (after expiration of grace period) and at the time of policy maturity he (insurer) pays him/her a sum insured as per premiums paid by policyholder. The amount received from paid-up policy is known as paid-up value.
Surrender Value: It is the amount received by policyholder after surrendering a policy.

Procedure to Surrender a Policy

  • To surrender an insurance policy visit nearest branch of your insurance company and ask for policy withdrawal form. You may need to submit your identity proof, bank passbook, latest contact details along with original policy documents.
  • Don’t forget to collect receipt from your insurer for future reference.
  • To save your precious time, you can download policy surrender form from your insurer’s website. Nowadays, many insurers are providing online facilitates to buy insurance policies and to pay premiums; therefore, you may also visit your insurer’s website to find out if he (insurer) is offering online policy surrender facility.
Suggestion: It’s best to talk to an expert or friend before surrendering a policy; because insurance policies are designed to provide benefits at the time of maturity.
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