Can You Surrender a Policy Without Losing Too Much of Your Premium Payments?
Premium payments are equivalent to the amount that an insurance company charges for the services which they provide. This amount greatly relies on statistics and is greatly affected by the health condition of the applicant. It is either collected in monthly or semi-monthly types of payments.
Common Reasons Why People Surrender an Insurance Policy
Policy holders surrender their insurance policy for several reasons. One of the main reasons is the incapacity of the policy holder to pay the required premium on time. Instead of waiting for the policy to be void, these policy holders opt to surrender their policies to the insurance company. Others are simply dissatisfied with the quality of service that their insurance providers give them while some simply need additional capital for future investments.
Cash Surrender Value
This is the amount of money that you will get in case you decide to surrender your policy. Unfortunately, if you do so, the amount which you will get will not be equivalent to the actual premium which you paid the company. Certain deductions will be made which will leave you with a smaller amount. It would be very difficult to lose little when you decide to surrender your policy. So if you are planning to surrender yours, it would be best to weigh the possible consequences of your decision. It may be best to try other options so as to maintain the amount of premium which you may get.
Typically, the amount that policy holders will get from cash surrender value is only 10% of the premium which they have paid. It is quite impossible to get the entire equivalent of the premium which you have deposited on your policy because there are several surrender fees that will be deducted from your premium. The only advantage for cash surrender value is that it is tax deferred. This means that you need not pay for the cash surrender value that you will get from the insurance company.
Alternative Option to Surrendering Your Policy
Retain Your Policy
The performance of a policy may vary from year to year. The income of the investments made on your policy may not be generating that much at present but it is very much possible that it will improve in the future. If you have carefully chosen the surety company before paying the previous premiums, then it would be best to stick with it until you finally finish the entire payment. Surrendering your policy may not be financially wise, unless the company is in jeopardy of getting bankrupt in the future.
Ask for loan back options on your policy. If you simply need additional income for this period then you may save more by not surrendering it. This is a better alternative for policy holders who need solutions for short term cash flow problems. There are several options that your insurance company may provide you if you are worried about how it can be paid. Simply discuss your concern with your life office agents for further clarifications.
Sell your policy
If you need a bigger amount on your policy then instead of surrendering it you may sell it on second-hand market. You may also opt to auction your policy. This will guarantee that you will receive greater amount on your policy compared to surrendering it.