Thinking about surrendering your insurance plan in the final phase? Think again!

Here is why surrendering a term plan is a bad idea:

You lose valuable life cover

• Surrendering the policy immediately ends the life insurance protection.

• Your family may lose the financial support that the policy was intended to provide.

• The remaining policy term continues without any insurance cover.

Premiums already paid may not provide any return

• Most pure term insurance plans do not accumulate cash value.

• Premiums paid over the years are generally not refunded after surrender.

• Only specific policy variants, such as return of premium plans, may have different provisions.

Buying a new policy can become expensive

• Insurance premiums generally increase with age.

• Future medical conditions may affect eligibility or premium rates.

• A fresh policy may require new underwriting and medical examinations.

Tax advantages may no longer continue

• Future premium payments cannot qualify for available tax* deductions once the policy ends.

• Early discontinuation may also affect certain tax* benefits, depending on prevailing tax laws and policy conditions.

You may lose additional policy benefits

• Riders^# attached to the policy, such as critical illness or accidental death cover, also end.

• Flexible payout options and other policy features are no longer available after surrendering.

Here is why people generally surrender term life insurance:

Financial constraints

• Temporary financial difficulties may make premium payments challenging.

• Some policyholders consider surrendering instead of exploring flexible payment options.

Better insurance alternatives

• New insurance products with different features may encourage policyholders to review existing coverage.

• However, replacing an existing policy should be evaluated carefully.

Changing financial responsibilities

• Some individuals believe they no longer require the same level of protection after repaying loans or achieving financial goals.

• Future responsibilities should also be considered before discontinuing coverage.

Lack of awareness

• Many people assume term insurance provides a surrender value like other life insurance plans.

• Understanding the policy features beforehand can prevent such misconceptions.

Policy no longer matches current needs

• Changes in personal or financial circumstances may prompt a review of existing coverage.

• Instead of cancelling the policy, reviewing available alternatives with the insurer may be more suitable.

The following are some of the alternatives one can choose instead of surrendering a term insurance policy:

Convert the policy, if available

• Some insurers may allow eligible term insurance policies to be converted into another life insurance plan.

• This helps maintain insurance protection without purchasing an entirely new policy.

• Availability depends on the insurer and policy terms.

Reduce the sum assured

• If affordability is a concern, check whether the insurer permits reducing the coverage amount.

• A lower sum assured may result in more manageable premium payments while retaining life cover.

Use the grace period

• If you are temporarily unable to pay premiums, utilise the grace period provided under the policy.

• This allows additional time to make the payment before the policy lapses.

Review your financial priorities

• Assess whether the financial challenge is temporary or long term.

• Reviewing your monthly budget may help identify ways to continue the policy without discontinuing it.

Speak with your insurer

• Contact your insurer to understand the options available under your policy.

• Depending on the policy conditions, they may explain available features, premium flexibility, or other suitable alternatives.