It is not wise to surrender insurance policy, particularly when you are surrendering whole life insurance policy.
You have to understand that whole life insurance policy protects you for life.
Even if the insurance company closes down, you are still protected. Many governments in the world make provision for other insurance companies to take over the coverage.
When you surrender insurance policy, you are not only losing out on the protection. You lose out in other ways as well.
If you surrender insurance policy before the breakeven period, you are getting less than you pay;
Most whole life insurance policies breakeven after ten years. Evenif you surrender insurance policy just at the breakeven point, you are getting back the cost. If you had put the money in fixed deposit, you earn the compound interest as well.
That is why surrender insurance policy is not wise.
Another reason is that you cannot get the same coverage at a cheap price. When you bought the insurance policy ten years ago, you paid a lower premium for the protection.
Once you surrender insurance policy, and hope to get another one in the future, you will have to pay much more premium for the same protection.
If you have existing illness, you will lose out on certain benefits if you buy a policy now.
That is why you should not try to surrender insurance policy bought when
What if you cannot afford to pay the premium?
Most of us have period of unemployment or times when our personal finance are in a dire strait. In this case, we can apply for a cash loan on our whole life insurance policy.
That is possible when the whole life insurance policy has acquired cash value. We can even opt for an automatic cash loan from the cash value itself to pay for the future premium,
That is definitely better than surrendering it, and losing the protection.
If you do not intend to pay for it anymore, you can even convert it to a paid up policy. The policy is still in force, and you can claim the benefits when you need it.
In this case, you can get the protection while not paying for it anymore.
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways.