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Can A Term Insurance Policy Be Surrendered?

If you want to surrender your term insurance policy, you will have to initiate it through your insurance service provider. The insurer then will calculate the surrender value which is to be paid to you. The surrender value will be lesser than the premiums that you have paid for the policy. 

The sum which the insurance company pays to you after you surrender the policy is called the cash surrender value. It is applied if the insurance policy is terminated voluntarily if the event which is insured takes place before the maturity of the policy. Several policies come with a guaranteed surrender value, which is the amount which is guaranteed to the policyholder if the policy is terminated voluntarily before maturity. The surrender before maturity, however, attracts a penalty.

The Insurance Regulatory and Development Authority of India (IRDAI) fixes the surrender value for the insurance for the initial seven years. Onwards from the seventh year, the surrender value comes at the discretion of the insurance provider, but only after consulting it from the policy regulator.

From the third year, the surrender policy is up to 30 percent of the paid premium; between fourth and the seventh year, the surrender value falls up to 50 percent. The rule of the thumb is this: the closer you are to your date of maturity at the time of your exit, the higher is the amount that you receive on the closure.

It is best to contact the insurance company to know the exact surrender amount of your term insurance policy.

Things To Ensure Before You Stop Your Policy

Before you exit a policy and take the decision on ‘can you surrender a term life insurance policy’, one of the things is to ensure that you have sufficient life cover . It is advisable to get a term cover for 10 which makes for at least 10 times of your annual income. It acts as a tool to replace income for your family in case you are not around. After you get this policy, you can keep on reviewing it to adjust it for the long term financial goals that you might have in mind, such as the education of your children.

It is quite important to have a life cover which is adequate for all your financial needs and goals, and also provides high inflation-adjusted returns on your savings so that you have a sizable corpus over time.


It is the option to exit from life insurance products before maturity wherein policyholders will get the amount which is called as Surrender Value. A regular premium policy will be eligible for surrendering after the policyholder has paid the premiums continuously for 3 years.

Also read: How To Choose The Correct Sum Assured Of Term Plan?

What Is Surrender Value? How To Calculate Surrender Value?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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