It all happened so fast, much like a perfect wedding. You were swept off your feet by the proposal, and everything just felt right. The mood was perfect, the settings were unreal, and before you knew it, you said “Yes I do”, and signed on the dotted line.
Fast forward 6 months, and the regrets start to creep in. You cast your mind back onto that fateful day, and the urge becomes overwhelming.
Except that its not a wedding.
You bought an insurance plan of some sort, and now you are considering if you should surrender the policy. It happens all the time, people buying policies but thinking about surrendering them later on.
Here are the top 5 reasons why surrendering a policy is the last thing you should do.
1. You lose all the premiums you paid on it
This is the primary reason that surrendering a policy is a bad idea. Generally speaking, a policy is the most expensive (value wise) when it is first started. After 6 months or 1 year, you have already paid the premiums across the most expensive period of the policy. It does not make sense to stop the policy now, for you lose every single cent that you have already put in.
And this is true for all types of plans.
Term Plans: The most expensive period, relatively speaking of a term plan is the start. You pay a level premium throughout the term plan, so the premiums you pay at the start cover the cost of insurance towards the tail end of the policy. You get no money back for surrendering a Term plan.
Endowment Plans: After surrendering, you only get back a fraction of what you paid, if you get anything back at all.
Whole Life Plans: Similar to Endowment plans, depending on when you surrender the plan. Generally speaking, you will not suffer financial losses if you surrender 20 – 25 years into the policy, but you do not get the most benefit out of the plan either.
2. The reason(s) you bought the policy is (are) still valid
So the agent whom you bought the plan from sweet talked you. You were charmed, mesmerized and besotted.
But when the dust settles, you begin to realize it might have been a mistake. But was it?
Part of the reason you bought the policy (or allowed yourself to be convinced to buy the policy) was that on some level, it made sense. It was either to address a coverage need, investment need, or both.
6 or 12 months after buying the policy, we are willing to bet that the reason still exists, even if your fervor for it may have died down. Your coverage needs for death, or Critical illness is still present because you are still alive and kicking.
Your investments and savings needs are still present because its safe to say you did not win any lottery or come into a huge inheritance.
If the reasons you bought the policy for a still valid, then let the policy have a chance to do what its supposed to do: Address your needs. Most policies last 5 – 10 years or more, and stopping it within 6 – 12 months kills any chance it has of properly developing.
3. After surrendering, you lose all benefits that the policy provides
When the policy stops, so do the benefits associated with the policy. No more cover. Your nest egg is not growing. That in itself may be acceptable, but guess what? You will need to find a replacement for those, either getting another policy for cover or another financial instrument for investment yield.
And then it will be back to square one, where you may find yourself being swept up in another charming proposal.
The best advice we can give
It all boils down to our mantra: Get Clear, Be Sure.
Do your own shopping and poking around before committing, and ensure that you are buying the policy for the right reasons in the first place.
Then once you made a decision, stick to your guns and stick to it through thick and thin.
Coincidentally, the same recipe makes marriages last a life time too.
www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.