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How to Surrender Term Life Insurance When you have No Liabilities

  • 20th Jan 2020
  • 5,561
How to Surrender Term Life Insurance When you have No Liabilities

You buy a term insurance policy when you have certain responsibilities like providing for your family or paying off a home loan. And leaving behind a lump sum amount is a good way to secure your family financially without burdening them. But what should you do with an insurance policy when you have zero liabilities? Surrendering your 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.

Should You Surrender Term Insurance Policy?

If you have no liabilities then paying hefty premiums may seem like a waste. The money paid towards premiums can be used for a better cause. But if you have a pure term insurance plan then the policy cannot be surrendered. Insurance policies with an investment or savings component are the only type of term plans which can be surrendered. So, if you are sure that there is no requirement of a death benefit then surrendering the policy should be the way to go.

Surrender Value of Your Term Plan

When you buy life insurance, you can exit the policy before the maturity period if you wish to. In return for exiting the policy, you get some amount of money which is the policy’s surrender value. Like previously mentioned, term plans need to have an investment or savings components like Unit-Linked Insurance Plan (ULIP) have a surrender value.

Every company has a set period after which you can surrender the plan and cannot be done immediately after buying the plan. The set period also depends on your policy term and the number of 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 a loan against the policy.

Reasons to Avoid Surrendering Term Insurance

1. Securing Your Family

Your family may be financially stable at the moment, 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 the future for your spouse and children, receiving a death benefit would help them stabilize their financial condition.

2. Safeguarding Against Health Risks

There is always a chance of getting a critical illness which has no connection to heredity or lifestyle.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.

3. Paying Off Loans

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 true if you were to take a loan due to an emergency but were unable to pay it completely. Your family would have to bear the financial burden of paying it off.


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