Moneyraam

I have heard a lot from people that they want to surrender their ULIP policy. How do you decide if you should surrender your policy or not? Here is list of reasons because of which you could be considering surrendering the policy.

1) My policy is not giving good returns.
Generally insurance policies have high premium allocation charges in the first three years. This is the reason why ULIP policies do not give good returns in the first few years. If you did not read the different charges applicable while buying the policy, read them well before you take the decision of surrendering the policy.

2) My agent says there is another policy that will give better returns.
Agent get commission on selling policy. Generally the commission in the first three years is higher than subsequent years. This could be the reason why your insurance agent is asking you to surrender your current policy and take a new one. If you take this new policy you will be paying those extra charges for more three years.

3) Lock-in period of my policy is over.
Your agent told you that your policy comes with a three year lock-in period. That mean if needed you CAN surrender the policy after three years. This does not mean that you SHOULD surrender the policy. Generally ULIP have higher charges in the first three years. If you have already paid the high charges why surrender the policy now?

4) I need money.
It is possible that you have a pressing need of money and want to surrender your policy. If this policy is the only way you can come up with the funds, see if you can make partial withdrawals to meet your needs. Else go ahead and surrender the policy.

Factors you need to look at while surrendering your policy:

1) Pre mature surrendering a policy can attract surrender charges. These charges will reduce the return on investment.

2) You will lose any loyalty the policy has to offer if you surrender it.

3) You may also lose any guaranteed return on your policy.

4) Highest NAV guarantee will also not remain valid if you surrender your policy.

Do consider the above fact, read the policy document that you received with your policy, and make a informed decision while surrendering your policy.

Meta: June 10th, 2010 by Ripul Gupta
Tags:   insurance · NAV · surrender charges · ULIP · unit linked insurance planNo Comments