How Term Insurance Surrender Can Lead to a Blunder?

A term Insurance plan can be easily possessed through any online insurance portal or comparison sites. Online comparison sites can give you many options to choose from. Buying any of the term plans is a very swift process. All you need to do is choose any of the term insurance players, select their plan and make the payment. Once you pay using any online channel you can get the policy in inbox within a few seconds. Some of the leading players for the term insurance are as follows:-

Every term insurance plan has got certain tenure till when you need to pay the amount of the premium. Minimum time till you need to pay for premium typically ranges from 10 to 30 years. Within this period you might be little allured to surrender policy after initial locking period of 3 to 5 years.

This is mainly because it’s difficult to pay the amount of premium for such a long period. Though you may feel the urge to liquidate funds on surrendering but there is a consequence that you must not ignore that. You can decide to surrender only after understanding what is the risk you are taking upon surrendering policy. Some of those risks have been elaborated below.

• Losing Capital

The biggest risk you may take when you surrender term plan is losing the amount you have invested. Usually, the amount that you are paid on surrendering the policy is less than what you have invested. In some term insurance plan, you may even have the risk of losing entire capital.

• Risking Life Security

If you surrender policy than life will be at risk again. In case of demise, family may face huge financial risks. The term plan covers seven times higher amount of sum than premium. You must analyze the same before taking the decision of surrendering term insurance.

• Getting deprived of the Maturity Benefits

Certain term plans offer maturity benefits event to the policyholder. But if the term policy is surrendered before the due date of policy then you keep yourself deprived out of that gain.

• Can’Get the Tax Benefit

If at all you get the surrender amount for policy than it may be taxable. Term plan claim can offer you the tax benefits as per section 80c and 10d. However, if you surrender term policy, you are at risk of losing out completely in all sense.

• Waste of Efforts

You invest time and energy in selecting best term plan. Surrendering term policy may be a mere waste of time along with money. You can always look out for some alternate ways of managing financial crunch instead of surrendering policy.

How to Avoid Term Insurance Surrender?

• Plan About Policy Term in Advance

Decide the tenure of the policy as per convenience. Typically you must plan the term of the policy accordingly to the time by which you can pay the premium easily. If you are able to decide about the policy tenure in advance than it becomes easier for you to plan about the funds. This way there may be fewer chances of the financial crunch as you can allocate the amount of premium in advance.

• Liquidate the Bonus

Few term plan may facilitate the policyholder with some interim bonus. You can always check about the same from term insurance policy. If you are getting any bonus on term plan than you can always try to avail before planning to surrender term insurance.

• Take the Loan

In some specific term plan, you may be able to take the loan against surrender value. The amount of loan may go up to 80% to 90% of surrender value. If such facility is available in term plan than you must use it instead of surrendering term insurance.

Buy term insurance policy with a long-term vision so that you can utilize it in a best possible way. You must never think of surrendering term policy because it may be a complete loss. To avoid paying the premium you can always choose a suitable sum insured and term of the policy. By taking care of few steps in advance you can always prevent the surrender of term policy and cover life risk with returns.