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Life insurance policy is a smart choice as a companion for the responsibilities of a household. Choosing a policy depends on the status of a person and thus coverage amount provided by the availed policy follows it.

Leading and most trusted insurance web aggregators like can be your assistance in choosing the best-suited policy plans.

Surrendering A Life Insurance Policy

Cancellation of the availed package of premium plan is what termed as Life Insurance policy surrender. One can surrender the availed policy at any time. It doesn’t even affect the credit score or ability to get other life insurance policies in the future.

Cancellation fees are certainly associated with every insurer and are termed as surrender charges. By paying these charges, one can initiate the exit option from the availed policy. It is quick in most cases. Every insurer is bound by law regarding how long an insurance company can legally hold the money of an insured.

Why Surrender Life Insurance Policy?

There are several reasons for which people can surrender or cancel their policy of which the most seen reasons arewhy to surrender life insurance policy

Getting Access To Cash Value For Unexpected Expenses: Access to cash value is the greatest benefit of surrendering a policy. After cancellation, premium payments are not ceased, and all the saved cash value is released to the insured. It will be more if a policy is older and active for a longer period. There may suddenly be a need for unexpected expenses due to some uncertainties and cash value can be immensely valuable.

Finding a Better Deal: Finding a better deal is also the best considerable reason for surrender because many companies are emerging in the market. Most of them provide better packages of coverage to sustain the competition in the market. A cheaper one having similar coverage is undoubtedly the most compelling reason to cancel the running policy and look for a better deal.

No More Need For Coverage: Many people may not need the coverage that can be provided by their policy anymore. Life changes drastically and so as the financial status as well. Children may grow up into a reputed job holder or a businessman, thus requiring no support from the insurer. Divorce, sold companies, etc are also some of the reasons as there will be no need for coverage for them.

However, in any of such cases, the surrender of a policy can credit your cash value for any future uses.

Important: What Can Be Reasons For Life Insurance Claim Rejection? 

When Should A Policy Be Surrendered?

The cash value of a security policy depends on the tenure of the policy and thus can be categorized into three types: -

Surrendering At The Starting Phase Immediately: -Soon after securing the policy from the insurer, a free look period is provided to the insured in the earliest period. In this period of 15 days, one can cancel their policy if dissatisfied with the terms and conditions. Minimum charges required for the stamp duty, service charges and medical tests are deducted from the insured.

On the other hand, the policy can be left for lapse after the free look period if not needed. To make a policy lapse, the policyholder just needs to stop the premium payments. If the policy is left to lapse with a longer period of premium payments then the insurer will provide no benefits.

Surrendering After Three Years: After the free look period is missed, there is no option other than policy lapse until the next three years. Cancellation of the policy after the date of maturity can bring 30% of the cash value-added with a surrender value.

Besides the total termination, one can also go for the paid-up policy instead of the traditional endowment plan. By acquiring this plan, the policy will not lapse if the premium payment is stopped, instead, the coverage will be provided with the decreased sum assured by the insurer.

How To Surrender The Life Insurance Policy?

One can surrender the policy at any time by considering the results of cancellation at that specific period. A simple procedure can be followed by the insured to terminate the policy.

One can contact the insurance provider after going through the online Insurance portals for necessary guidelines regarding surrender.  The best time to surrender and the benefits that can be provided by it can also be assisted with policy experts.

After all the key factors considered, you just have to hop into the insurance company and inform them about your intention to surrender. Write a letter of instruction if it is needed and collect the surrender form. In case if you prefer an online insurer, you can send a letter or form to the company via email or registered mail. Confirm the reception by calling the company and your request will be processed sooner or later.

Surrender Value and Life Insurance Surrender Calculator

If you have opted for a traditional endowment policy, then things will get quite complicated in calculating the surrender value. It depends on both the premium paid and bonus received. This value is divided into two types namely value-guaranteed surrender value and special surrender value. The first one is easy to calculate by having an idea of the percentage of returns assured by the company. Special surrender value is quite complicated and can be calculated after the surrender request is submitted.

Value Guaranteed surrender value normally provides 30% of the premiums paid excluding the first one and some other exceptions.

Read: Ensure Smooth Life Insurance Claim Settlement

Special surrender value depends on the paid-up value which is the reduced sum assured. This is where an online life insurance surrender calculator comes into play. This makes the calculation easy and simple. One can manually calculate it by multiplying the basic or original sum assured and the ratio of No. of premiums paid and a total number of premiums payable which is quite tough.

Final Words

An insured should consider all these essential factors before attempting for the cancellation of their availed insurance. Experienced financial advisors or online aggregators can help you with the best surrender value analysis based on all key factors. Without the help of such experienced professionals, cancellation or leaving the policy to lapse is potentially a loss to the insured from all aspects.


Naval Goel is the founder of He is an Associate Member of the Indian Institute of Insurance`, Pune. He has been authorized by IRDA to act as a Principal Officer of Insurance Web Aggregator.
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