Life Insurance Q&A, Surrender of Life Insurance Endowment Plans


In this video, we will discuss some of the most important things to know about surrender of life insurance endowment plans A lot of people end up surrendering life insurance endowment plans without being aware of the implications One you have bought a life insurance endowment plan, you need to know when to surrender it You can only surrender a life insurance endowment plan only when it acquires surrender value For you to get any money back from the endowment policy after the exit, the policy needs to acquire a surrender value Any endowment plan that has a term of 10 years or less, typically starts acquiring a surrender value from the third year onwards For endowment plans with terms of 10 years or more, the surrender value starts acquiring after 3 years Life insurance endowment plan combines life insurance protection with investments Even when it is acquiring surrender value, you only get a fraction of the premiums paid This is happening because charges such as administration charges and commissions get deducted from the premium A major portion of the charges get deducted upfront As a result, a smaller amount gets invested initially So, in the fourth, fifth or sixth year, you get a miniscule fraction of the premium back Around the eighth or ninth year, you get the premiums back

So, with an early surrender of the plan you are not even recovering your premium If you have claimed tax deduction on the premiums paid, there are tax implications When you consider buying an endowment plan, ensure that you know all about it's benefits and buy it for the right reasons Examine the policy conditions during the "free look period" when you get the policy documents and return the policy if you notice something amiss

Source: Youtube

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