Call Us

FOR EXISTING POLICY

Have query on premium, payout or any servicing need?

Call us:

1 860 266 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

Dedicated NRI Helpdesk:

+91 22 6251 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

FOR NEW POLICY

Want to buy a new policy online?

Call us:

+91 22 6984 9300

Give missed call for a call back:

+91 11 6615 8748

Monday - Sunday | 8 am - 11 pm IST


Exclusively for NRIs:

Call us:

Give missed call for a call back:

+91 11 4473 0242

Monday – Sunday | 9 am – 9 pm IST

Language

Need assistance in choosing the right insurance plan? Get a call from our Expert.

Need assistance in choosing the right insurance plan?Get a call from our Expert.

+91 dropdown arrow

Select Plan dropdown arrow
  • Term plans
  • Saving plans
  • Wealth plans
  • Retirement plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

Want to Surrender Your Term Insurance Plan? Here’s How You Can Do It

Understand About Surrendering the Term Insurance Policy

You buy a term insurance policy for two reasons: to provide a financial safety net to your family, and the second is to help get access to funds for paying off loans. Thus, the affordability of the term plan makes this policy type the most widely used by individuals.
 

Can I Surrender My Term Insurance?
 

As you are aware, term insurance is a pure type insurance contract in which the policyholder should continue to pay the premium for the agreed term and should there be an unfortunate eventuality; the insurer would pay the nominee the amount of sum assured under the policy. Now, suppose you survive the term insurance tenure and no longer have heavy financial obligations. In that case, the fixed premium under the policy could seem a waste, and you probably want to put it in some other savings avenue.
 

However, there are two possible ways to surrender a term life insurance policy:
 

  • During the free look-in period of 15 days from the issue of policy (30 days for online purchase of the life insurance policy)
  • At any other point of time during the tenure of the policy for plans which have a term insurance component

What is the Effect of Surrendering My Policy?


Signing a Document for Term Insurance Policy Surrender


The insurance company will cancel the policy, and your nominees will no longer be eligible to receive any death benefit under the policy. You could receive some paid-up value on the policy according to the specific method of computation of term life policy cancellation proceeds under the policy but remember this amount is taxable*. Any loan against the policy would have to be squared up before the surrender process can happen.
 

What is the Surrender Value on the Policy?
 

As mentioned before, term life plans can have surrender value which is the amount that has been allocated from the premium paid. Different insurers have different methods of calculating the surrender value of their policies. In general, you should have paid the premiums for a stipulated number of years before a surrender request can be entertained.
 

How Do I Cancel My Term Insurance?
 

In TATA AIA policies, the policyholder can surrender voluntarily and receive the surrender benefit computed according to the policy's terms and options for payouts. A special surrender value computed at a specified percentage of the premium paid is also paid.
 

What are the Factors I Should Consider Before Surrendering the Life Insurance Policy?
 

Instead, you should deeply consider the following outcomes before deciding to go ahead.
 

  • You should ensure that there are sufficient funds to meet the financial obligations that might emerge. You could be tempted today if there were a sudden drop in the set of liabilities, but you must be prepared to cover your family if you have to take up a new obligation due to changed circumstances. Continuing with the policy would have then been a good approach.
  • If your children start earning, you could feel that your responsibilities would decrease. However, it would not be feasible to overburden your children should tragedy strike. It would be prudent to let the policy run for its tenure.
     

The decision to surrender an ongoing policy should not be taken hastily.
 

What are the Alternatives to Surrendering the Term Plan?
 

Term insurance plan surrender is not an advisable option especially considering that a new policy at an older age would be more expensive, and you would need whole life coverage if you wish for a longer coverage period. Therefore, you should look for alternatives to the surrender option. The two ways you can avoid the unnecessary outcomes of surrendering the plan are given here.
 

  • You can opt for a decreasing term policy that has less premiums and a decreasing coverage as the policy reaches the term. You can have just enough coverage, and your premium, although unchanged, is reasonable. Your family, of course, continues to get protection from any unforeseen eventuality.
  • You can opt for a Term Plan with a Return of Premium2. Although the premiums on this policy are more than basic term plans, the survival benefit is paid at the end of the policy's tenure. Thus, the premium paid need not be considered a sunk cost.
     
Why Should I Avoid Surrendering a Term Insurance Policy?
 

When you surrender the term plan, there are many risks that your family is exposed to, and these should be mitigated. Unfortunately, an alternative such as a new policy would be very expensive for the extended life period, even for lesser coverage. Here are some reasons why you should not surrender a life insurance policy:
 

  • Protection to the family: Despite the squaring up of liabilities and relatively better financial conditions, an ongoing term life policy should be allowed to continue. If an unfortunate eventuality occurs, the death benefit under the policy would substantially help the family, given that you would be no more around to provide for them further.
  • Rise in medical risks: As you grow older, you could be afflicted with some medical conditions. If they are progressive, then the existing policy would pay the death benefit after you pass away at the end of the terminal stage of illness.
  • Better coverage for a lesser cost: Considering that the premium on term life policies is fixed, it is a cost-effective way to secure coverage under inflation-adjusted conditions.
  • Avoiding debt, especially in rising inflation: If your family had to contend with paying a loan after you leave them without a term insurance policy, the interest burden would be more, especially when inflation is rising. On the other hand, they can pay off the loan in full or partially with the death benefit. Then, the reduced interest outflow can be manageable.
     
 Conclusion
 

You have taken the right step in getting adequate term life coverage, especially if you are the primary earning member of your family. If you have reached the stage of life where you have higher income, better returns from investments and a good corpus for retirement, you would feel that the term life policy should be surrendered. However, it is not a feasible idea for the reasons discussed above. Therefore, allow the policy to run for its tenure and keep your family protected at all times.
 

L&C/Advt/2023/Jan/0182

Get complete protection at affordable cost & tax benefits

+91 dropdown arrow
  • +93 Afghanistan

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.


 

Looking to buy a new insurance plan?

Our experts are happy to help you!

+91

Select plan
  • Term plans
  • Saving plans
  • Retirement plans
  • Wealth plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in

People Like You Also Read

How to Cancel a Life Insurance Policy
Read More
Where Should I Save to Get Guaranteed Monthly Income?
Read More
Advantages of Group Term Life Insurance - Get the Best Coverage
Read More
3 Types of People Who Must Buy Term Plan with Return of Premium | Tata AIA
Read More
What If I Don't Pay ULIP Premium? Consequences and Options
Read More
A Complete Guide to ULIP Charges: Everything You Need to Know
Read More
How ULIP Plan Works - Know The Features and Benefits
Read More
6 Financial Flexibility Benefits of Unit Linked Insurance Plans (ULIPs)
Read More
Child Investment Plans in India 2024 | Tata AIA
Read More

People Like You Also Read

How to Cancel a Life Insurance Policy
Read More
Where Should I Save to Get Guaranteed Monthly Income?
Read More
Advantages of Group Term Life Insurance - Get the Best Coverage
Read More
3 Types of People Who Must Buy Term Plan with Return of Premium | Tata AIA
Read More
What If I Don't Pay ULIP Premium? Consequences and Options
Read More
A Complete Guide to ULIP Charges: Everything You Need to Know
Read More
How ULIP Plan Works - Know The Features and Benefits
Read More
6 Financial Flexibility Benefits of Unit Linked Insurance Plans (ULIPs)
Read More
Child Investment Plans in India 2024 | Tata AIA
Read More
Website Logo Image Icon

Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Disclaimer

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not guaranteed issuance plans, and they will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • 2Return of premium shall be the return of Total Premiums Paid (excluding loading for modal premiums and discount) by the policyholder at the end of the Income Period
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.