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Term insurance policies offer financial coverage and other benefits to the insured for a pre-specified period of time. Thus, when you surrender the term plan, you lose all the benefits. But is it possible to cash out the premiums paid till now? Let’s find out!
Term life insurance is designed to offer death benefits to the insured in the event of his demise during the policy term. It means if you have purchased a term insurance plan and you die during the specified term, your family will receive a financial amount. This lumpsum amount can be used to deal with your financial obligations after your demise and ensure a financially secure future for your dependents.
But what happens if you surrender your term insurance plan or survive its term? Is it possible to cash out the policy? Keep reading the blog for the answers!
Is It Possible to Cash Out Term Insurance?
Generally, you can cash out a life insurance policy as it comes with a maturity benefit. It means if you haven’t made any claim during the policy tenure, you will be eligible to cash out the premiums you have paid.
However, this is not the case with term insurance, as it doesn’t come with a maturity benefit. As mentioned in the introduction, it is solely designed to offer death benefits to the policyholders.
So, it is not possible to cash out a term insurance policy if you have survived the term.
What to do If You Have Outlived Your Term Insurance?
If you have survived your term insurance plan, you can opt for the following options:
- Renew Your Term Insurance
Term insurance attracts a majority of people because of its death benefits. If you want to financially secure your loved ones or dependents after your death, then there is no better option than renewing your term plan.
But before policy renewal, reassess your insurance requirements risk exposure and make necessary adjustments in the premium and assured value of death benefit. - Opt for Another Insurance Policy
If you don’t want to renew your term insurance plan or are not satisfied with the benefits, you can simply cancel it and buy a new term or life insurance. This will help you enhance your coverage and put your hard-earned money to better use. - Convert to a Permanent Life Insurance Plan
Some insurance providers allow you to convert your term insurance policy into a permanent life insurance plan. With the right life insurance plan, you will get comprehensive coverage along with maturity benefits. - Sell Term Insurance Policy
If you want to cash out your term policy, then you can consider selling it to someone in need. For this, you need to find a trusted broker who will connect you with an interested buyer. However, not all term policies can be sold. So, talk to your insurance company before moving forward with this option.
Term Insurance With “Return of Premium” Feature — Best Way to Cash Out Term Insurance Policy
Tata AIA’s Return of Premium is a term insurance benefit that pays out a survival/maturity benefit in case you have survived your term insurance plan. You can buy a term insurance plan which offers the return of premium upon maturity.
Term Insurance with Return of Premium feature or TROP servs dual benefits. It offers death benefits post your death during the tenure and a lump sum return on premium in case you outlive the policy.
For more information on “TROP”, get in touch with our experts!
Final Words
The short answer to the question — Can you cash out a term insurance plan? — is NO.
Since term insurance plans don’t offer any maturity benefits, you can not cash them out if you have survived through the terms. They are only designed to offer death benefits to the insured.
However, you can opt for a term insurance plan with the “Return of Premium” feature. This is a special feature that allows you to enjoy the return of the sum of all all premiums paid if you have outlived the term plan.
While TROP is slightly expensive, it is totally worth the price for the dual benefits it offers.
We have discussed everything you need to know about cashing out term insurance plans. We hope it helps.
